To address this concern, in 2012, international standard setters issued a set of minimum risk management standards for financial market infrastructures including CCPs.4 These principles, known as the “Principles for Financial Market Infrastructures” (PFMIs), require that a CCP maintain sufficient liquid resources. This includes the requirement that a CCP have a pre-funded default arrangement and that the CCP collects initial and variation margin. In particular, the PFMIs stipulate that a CCP must be able to withstand, in a stress environment, the failure of the member having the largest exposure to the CCP. In some cases, this requirement is strengthened to require the ability to cover the failure of the two largest members. The PFMIs also require the CCPs to develop effective methodologies to estimate their funding exposures, so that they can better manage their liquidity risks. Another important risk management task for CCPs is the on-boarding of new members and the monitoring of the condition of existing members. The strength of the CCP is ultimately derived from the collective strength of its members. The mutualization of the CCP’s net credit risk across its members creates an incentive for its members to only want well-capitalized and well-managed members as part of the CCP. The CCP also must ensure that members are meeting their margin requirements and remain in good standing. It is also worth noting that these safeguards for CCPs will need to be put into place along with other reforms such as the use of multilateral trading platforms and trade repositories.

Diversity may be the true mother of all invention – and the father of all risk management. That being the case, what should be the next steps in harvesting these benefits? We have all got a lot on our plates: from the uncertainties of Brexit to the complexities of geo-politics; from wrenching technological change to rising inequality; from simmering mistrust of big business, big banks and big government. We would be forgiven for putting diversity issues on the back-burner while these more pressing matters resolved themselves, would we not? While this sounds reasonable, I think it would be exactly the wrong response. This environment is precisely one in which we should be pressing the accelerator, rather than the brake, on diversity policies and practices. Why? Because an environment of acute uncertainty and ambiguity is one in which the organisational returns to diversity are likely to be greatest. What is the best safeguard against the ambiguities of geo-politics? A workforce with diversity of thought and experience who can juggle competing world views. How are the opportunities of technology best to be harnessed? With a creatively diverse workforce, masquerading as five year olds. How is trust to be rebuilt among diverse and disenchanted customers and stakeholders? By having a workforce which is their mirror-image, who can understand their needs and perspectives. And how are entrenched inequalities in income and wealth to be redressed? By first tackling inbuilt inequalities in educational attainment and social mobility. These are fine as aspirations, but how are they to be realised?