The foreign exchange market serves as the primary mechanism for making payments across borders, transferring funds, and determining exchange rates between different national currencies.

In the past decade, we have witnessed the broadening and the massive expansion of the foreign exchange market. While in the past, commercial banks dominated the market; participants today also include commercial as well as investment banks, foreign exchange dealers and brokerage companies, multinational corporations, money managers, commodity trading advisors, insurance companies, governments, central banks, pension and hedge funds, investment companies, brokers/dealers, money transfer firms and other participants.

The effective management of risk is an important aspect of all business activities. In Foreign Exchange operations, risk management is even more critical because many of the day-to-day operational risks are not well understood. Not understanding ones “enemy” is a sure prescription for disaster.

This course represents a practical approach to explaining the unique risks in foreign exchange operations, as well as how to implement an effective operational risk management system for these transactions.

In part-one of this course, we examine the basic principles surrounding the use and operational aspects of Foreign Exchange – specifically we are going examine how funds move around the globe, how transactions are settled and the major operational risks in this market and the steps that have been taken to lessen these.

Subjects that we cover include:

• How foreign exchange works,
• Foreign exchange terminology,
• Correspondent banking,
• SWIFT,
• The foreign exchange settlement process,
• Settlement risk and exposures,
• Continuous Linked Settlement. 

In part-two we cover best practices in the management of operational risk in foreign exchange activities together with a case study  of a recent series of events at a major global bank that clearly illustrate all that we have covered in parts 1 and 2 of this course.

On completing both parts of the course, attendees will be in a position to implement the standards of best practice in their own work environment.