The risk management function at the Licensed Person must identify, evaluate, mitigate and monitor the following risks at a minimum:

1. 10.3.1Operational Risk
   1. a)Operational risk is defined as the risk of loss, resulting from inadequate or failed processes, people and systems or from external events.
2. 10.3.2Market Risk (Currency Rate Risk)
   1. a)Market risk is the risk that the value of an asset may decrease due to movements of market factors;
   2. b)The most important type of market risk for a Licensed Person is the risk of fluctuation in the foreign currency rates; and
   3. c)The Licensed Person must ensure that all market forces are continuously evaluated for prudent management of market risk.
3. 10.3.3Counterparty Risk
   1. a)The risk that the other party to an agreement may default is the counterparty risk. The Licensed Person must identify, measure, monitor and control counterparty risk prior to establishing the business relationship; and
   2. b)Exposure limits assigned to counterparties must be continuously monitored.
4. 10.3.4Compliance Risk
   1. a)Compliance risk is the exposure to legal penalties, financial penalties and material losses that the Licensed Person faces when it fails to act in accordance with applicable Laws, Rules, Regulations, Notices and the Standards.
5. 10.3.5Reputational Risk
   1. a)Reputational risk is the risk of loss, resulting from damages to a Licensed Person’s reputation, such as loss of revenue or increased operating, capital or regulatory costs; and
   2. b)Reputational risk includes the risk to the country’s image resulting from unacceptable business practices of the Licensed Person.
6. 10.3.6Security Risk
   1. a)Information security risk is caused by unauthorized access to the information or systems which can result in unauthorized use of such information or systems; and
   2. b)A Licensed Person must refer to Chapter 13 on General Security and Chapter 14 on Information Security for illustrative mitigating measures.
7. 10.3.7Money Laundering/Terrorist Financing Risk
   1. a)Money laundering risk is the risk of the Licensed Person being involved in, whether deliberately or not, transforming the proceeds of a crime into apparently legitimate money or other assets. The risk on account of financing terrorism, directly or indirectly, is also included here; and
   2. b)Licensed Persons must refer to Chapter 16 on AML/CFT Compliance to understand the expectations of the Central Bank regarding measures to be implemented in order to prevent money laundering and to combat terrorist financing.