Onboarding: Difference between revisions
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*'''Don’t obsess over the disaster scenarios'''. Build basic protections against the failure of the relationship or your counterparty — failure to pay, insolvency — but beyond that, remember this is a relationship. as to which... | *'''Don’t obsess over the disaster scenarios'''. Build basic protections against the failure of the relationship or your counterparty — failure to pay, insolvency — but beyond that, remember this is a relationship. as to which... | ||
===[[Relationship contract]]s=== | ===[[Relationship contract]]s=== | ||
But, but, but — why must it be that our onboarding process does nothing ''but'' obsess about disaster scenarios? We know of cases where even affiliated broker-dealers — entities under common control in the same financial services group — have laboured for ''years'' to conclude a simple [[Global Master Securities Lending Agreement|stock lending agreement]]. | But, but, but — why must it be that our onboarding process does nothing ''but'' obsess about disaster scenarios? We know of cases where even affiliated broker-dealers — entities under common control in the same financial services group — have laboured for ''years'' to conclude a simple [[Global Master Securities Lending Agreement|stock lending agreement]], horns locked over the [[indemnities]] each required of the other, neither side advertent to the fact that the risks between them would be reported at a consolidated group level anyway. | ||
And when it comes to actual clients, every element of the onboarding process is arrayed ''against'' the client as if, until proven otherwise, each should be taken as a dissolute money-laundering gambler and fraud who will stop at nothing to subvert your legitimate interests in making a fair return out of your relationship. Now, look: the [[JC]] is certainly not naive enough to think there are no institutions like that in the ecosystem. There certainly are. Most of them, in fact: we assume a broadly Hobbesian view of human nature in the wild, and wish others would too. And are [[salespeople]] willfully blind to the risks of intercourse? As a randy goat. A whiff of a sales credit can suspend the most foundational disbeliefs in a heartbeat. But that is not the point. The point is that, even against such bounders and cads, a mute legal document — especially one you hammered out nineteen years ago and haven’t looked at since — ''is no kind of protection''. [[Don’t take a piece of paper to a knife-fight]], that is to say. ''Take a knife''. Your practical risk is best managed by, well, ''actual risk management''. | |||
This is what half of your employees — the control function — are engaged to do, after all. ''Let them''. Intraday risk is best managed by relationship management: margin, credit lines, client communication — to ''avoid'' cataclysmic meltdown, rather than by sleep-walking into it and then looking to an arsenal of weapons you prepared a decade ago to wax your client. Think Chernobyl: by the time the core explodes, ''it’s too late''. | This is what half of your employees — the control function — are engaged to do, after all. ''Let them''. Intraday risk is best managed by relationship management: margin, credit lines, client communication — to ''avoid'' cataclysmic meltdown, rather than by sleep-walking into it and then looking to an arsenal of weapons you prepared a decade ago to wax your client. Think Chernobyl: by the time the core explodes, ''it’s too late''. |