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Risk & Compliance – Exchanges adopt new technologies, face new challenges

Seema Nayak, Chief Compliance Officer (CCO) at NCDEX, is responsible for compliance, member compliance, membership, inspection, investor protection and enforcement. She has been associated with NCDEX for 4 years. She is an MBA with over two decades of experience in the securities markets.

 

Ramadevi Srinivasan heads the Risk Management Department at NCDEX and leads the teams for enterprise risk and governance, internal audit and information security. She has been associated with NCDEX for over 10 years. She is a chartered accountant with over 3 decades of post qualification experience in the financial services sector.

Seema Nayak and Ramadevi Srinivasan speak about risks in the stock market space and the art of managing these risks in a scenario where stock exchanges have seen transition from historical markets operating on ‘open outcry’ models, low transparency and unregulated as well as fragmented set of intermediaries to online electronic platforms offering near total transparency. Says Ramadevi Srinivasan: “There has been a sea change in the way markets are viewed by the sta

keholders – from a hazy perception that markets are risky and speculative and hindering economic development to a growing realization that regulated markets can and do provide a platform for price discovery and sophisticated tools for management of risks posed by price volatility. They are a necessary adjunct to global economic development.”

Seema Nayak believes that computer-based trading, including algorithmic trading (AT) and high frequency trading (HFT), have become predominant features of modern financial markets. Fintech solutions that make use of big data analytics, artificial intelligence and blockchain technologies are being introduced at an unprecedented rate in the operations of exchanges, she adds.

 

GRC CHALLENGES

The importance of GRC, or Governance, Risk and Compliance, in the technology-based operations cannot be overemphasized. To use a popular cliché, technology is a good servant but a bad (dangerous) master and needs to be tempered by the ever-watchful eyes of the GRC in a highly regulated environment. The role of GRC is therefore critical, as compliance ensures adherence to regulations, while risk and governance manage internal controls, identify and manage present and emerging risks, thereby improving the overall resilience of the organization. Particularly for exchanges, the GRC challenges are aggravated by their dual role as regulated entities and market regulators in their own r

ight.

Seema Nayak emphasizes that compliance managers have to navigate through the diverse regulatory requirements applicable to exchanges, covering everything from best execution, prevention of market abuse, data privacy, cyber-security, anti-money laundering, business continuity et all, besides the routine corporate compliances, and are at the same time responsible for ensuring a similarly huge gamut of compliances by their member brokers.

Ramadevi Srinivasan argues that risk managers in the exchange space have to deal not just with the conventional risks (strategic, operational & financial), but also address more unconventional risks posed by IT failures, cyber threats, regulatory risks, etc. In fact, the recent pandemic situation has posed an unprecedented challenge to the risk managers in the form of WFH risks.

HOME-GROWN TECH TOOLS

NCDEX has deployed various technological solutions, including data analytics tools, to meet compliance and risk requirements, which are very effective in pre-empting compliance / risk issues and hotspots. “Many of our tech tools are home-grown and developed to provide custom built solutions. However, in compliance and risk space, more than any other, the technology is only as good as the person – and we at NCDEX respect that people matter,” avers Seema Nayak.

GENDER DIVERSITY

NCDEX practices gender diversity. Its compliance, risk management and HR teams are led by women executives. Women representation at the Senior Management Group levels is 30% and overall women representation level is also 30%. Apart from Seema Nayak and Ramadevi Srinivasan, other female employees at VP and above level include Aditi Mukherjee, Executive Vice President and Head, Human Resources, Poornima Shetty, Senior Vice President, Finance & Accounts, Smita Chaudhary, Vice President, Compliance & Investor Services Cell, Kavita Jha, Vice President, Retail & Institutional Sales and Monica Suvarna, Vice President, Corporate Technology & PMO. Seema Nayak says: “We are proud to note that most of our departments and even our group companies have women executives in leading roles. To conclude, a tongue in cheek observation, notwithstanding gender diversity, given that women tend to be better listeners, are more approachable, are naturally tuned to enforcing discipline, and better at consensus building, women executives may actually outperform in specific areas like compliance, HR, etc.”

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