responsibility - Questions for Marcus Thompson

“We want to manage risks efficiently”

What is the highest risk for Deutsche Börse Group?

We have three different types of risk: first, operational risk; second, financial risk; and third, business risk. Our operational risk makes up about 70 per cent of the total. It is broken down into four categories, two of which are really significant: the first covers availability risk, and in particular, IT availability – what happens if our systems don’t work, with potential customer claims if the markets were closed; the second concerns legal and compliance risks, stemming, for example, from sanction regimes in Europe and the US, which aren’t necessarily harmonised. Financial risk, which is about 20 per cent of the total, consists of market and credit risk. Unlike banks, we have very little market risk, and, although we have a lot of credit exposure, our credit risk is largely mitigated through collateral and through Eurex Clearing AG’s clearing fund. Business risk is the risk that revenues fall or costs increase so that we don’t meet our business targets. Essentially the biggest risk here is the risk of missing something new, something that is going to completely change our markets – creative destruction, if you will. And this is why I think that “Accelerate” is so important in changing how we look at ourselves and how we do things.

Marcus Thompson

Chief Risk Officer

British national Marcus Thompson took on the responsibility for risk management at the Group as Chief Risk Officer in October 2013 in the course of his long career with Deutsche Börse Group. He is also a Member of the Executive Board of Clearstream Banking AG.

What would have happened if Greece had become insolvent?

We have Greek customers both at Clearstream and at Eurex Clearing. For a long time, we have not accepted Greek securities as collateral, and the credit lines that we give to Greek customers were in any event very limited and secured by collateral. So the credit risk was effectively zero. If the Greek state had defaulted, then we would have had no credit loss. There is very little business risk because we don’t earn a lot of revenue from Greek customers. On the operational risk side, we had a task force at Clearstream dealing with the changes in regulation and the capital controls introduced by the Greek government. And that was something really new for all of us, I think, because the Greek government was introducing new legislation overnight, and we were having to follow it together with the rest of the market the next day. That was very difficult, because the legislation was in Greek, nobody had ever seen it before, and somehow we had to interpret it in the same way as our customers and avoid complaints of having actions taken in the wrong way. The situation would have been even more complicated if Greece had actually defaulted. But all in all, things worked out well because we were well prepared and the whole team came together daily for weeks to coordinate our response as the situation developed.

How would you evaluate the risk that the UK leaves the EU?

For me personally, this is a very difficult question because, being British, but having lived in Germany for a while, I’m not sure how I would be affected. I see myself as being European, I want to remain European and that may mean taking a new nationality. From a business perspective, the customers based in the UK are, of course, essential participants in the European capital market. A unified European capital market, which includes the UK, is certainly more competitive on a global scale than a fragmented one. If the UK left the EU, this would be a loss for all Europeans.

Is there a difference between risk minimisation and risk management?

From a business perspective, there are three risk management principles which we follow: we want to understand the risks that we’re taking; we want to manage those risks efficiently, and we want to make sure that the relationship between risk and return is sufficient – that the return compensates for the risk that we take. Doing business, you take risk. But we want to see that the risks are managed actively within our risk appetite – that’s what we mean when we say we manage risk “efficiently”. Of course, in certain essential parts of the market infrastructure, particularly the clearing house, we manage risks within a very tight risk appetite.

Information technology

Nowadays, exchange organisations are technology companies in their own right: resilient, state-of-the-art IT systems provide the foundation for virtually all capital markets services. In this context, uninterrupted systems operation at Deutsche Börse Group’s data centres remains the cornerstone for reliable trading, settlement and custody services. This level of reliability is ensured by IT development and operations processes certified according to ISO Standards 9001 and 20000. In addition, Deutsche Börse offers tailor-made systems solutions to its clients, such as connectivity to Deutsche Börse's systems, specialised trading software, or solutions for SWIFT connectivity, accounts reconciliation and SEPA payments.

Technology is a business area of Deutsche Börse Group.