The risk management policy at the SDC stems from its vision, mission, and objectives of enhancing investor confidence in securities and reducing risks related to related to the settlement of trading transactions executed through the market. It is consistent and integrated with the SDC’s culture and core values that policy emerged from all decisions and strategies related to managing the SDC’s risks

The SDC's risk management policy includes a clear mechanism that is compatible with the best international practices concerned with risk management, procedures to deal with potential risks, and tools and standards to measure and evaluate the effectiveness and success of risk management, with the need to identify the constraints likely to be encountered during the application of risk management strategies at the SDC.

The basic principle on which the SDC's risk management policy is based stems from the fact that the SDC is a public utility institution established under the Securities Law, and does not aim to make a profit. Therefore, all operational risks associated with the tasks assigned to the SDC must be avoided. Since it is known that not all risks can be completely eliminated, the impact of some less important types of risks can be accepted or reduced based on measuring the degree of potential risk versus the cost of completely avoiding it.

Risk management in the SDC forms one of the basic elements of the SDC’s strategies. So that a general framework is developed to integrate, design, evaluate and improve the management of potential risks that could affect the operational transactions of tasks assigned to the SDC with the utmost accuracy, safety and reliability in accordance with international standards and best practices. In order to achieve this, the SDC adopts the following strategies:

• Develop effective frameworks and policies to deal with financial, operational, legal and technological risks.
• Integrated management is considered an integral part of all organizational activities at the SDC, involves all stakeholders and is adopted as a comprehensive risk management effort.
• The SDC is committed to directing comprehensive and collaborative efforts to manage risks, including the opinions and perceptions of stakeholders, to increase awareness of risks and predict them in accordance with changes and developments.
• A dynamic response to variables in the internal and external context of the SDC’s environment is achieved by providing evidence-based and fact-based information, ensuring its updating, accuracy and timely access.

Responsibilities:

Establishing a risk management policy is one of the powers of the Board of Directors, which is also responsible for approving the strategy and degree of risk, as well as the annual review or whenever the need arises. While the Executive Management either by Committee or Unit for Risk Management is responsible for implementing and planning risk management activities at the SDC.

Risk management practices

• Risk analysis: SDC analyze the internal and external environment and analyze the main activities and processes in the SDC to identify potential risks. This includes identifying and evaluating financial risks, such as price fluctuations and illegal transactions, and operational risks, such as power outages or systems failure, and legal risks, such as non-compliance with financial regulations. 
• Establish policies and procedures based on the risk analysis, we develop and implement strict policies and procedures to deal with potential risks. These policies include access controls, identity verification, internal monitoring, and technology control policies.
• Continuous risk assessment and monitoring: We evaluate risks on a regular basis to ensure the efficiency and effectiveness of risk management procedures. This includes reviewing and updating policies and procedures based on changes in the market, technology and financial legislation.
• Cooperation with stakeholders: We are working to enhance cooperation with stakeholders, such as banks and financial regulatory authorities, to exchange information and experiences and improve risk management practices.

• Risk analysis: SDC analyze the internal and external environment and analyze the main activities and processes in the SDC to identify potential risks. This includes identifying and evaluating financial risks, such as price fluctuations and illegal transactions, and operational risks, such as power outages or systems failure, and legal risks, such as non-compliance with financial regulations.
• Establish policies and procedures based on the risk analysis, we develop and implement strict policies and procedures to deal with potential risks. These policies include access controls, identity verification, internal monitoring, and technology control policies.
•  Continuous risk assessment and monitoring: We evaluate risks on a regular basis to ensure the efficiency and effectiveness of risk management procedures. This includes reviewing and updating policies and procedures based on changes in the market, technology and financial legislation.
• Cooperation with stakeholders: We are working to enhance cooperation with stakeholders, such as banks and financial regulatory authorities, to exchange information and experiences and improve risk management practices.

The SDC is committed to providing a safe and reliable environment for investors that guarantee the safekeeping, transfer of ownership of securities and the settlement of their prices by adopting international standards and best practices, as well as maintaining the confidentiality of information. Risk management is an essential part of our vision to achieve excellence in our services and maintain our reputation as a reliable and attractive Central Securities Depository for securities investments.

Ensuring communication and consultation with stakeholders throughout the risk management process, as well as continuous monitoring, control, review, and vigilance for every risk, and learning from the experiences of others and lessons learned contribute to the continuous improvement of risk management at the SDC.

The following is the most prominent aspects of risk management in the SDC:

Legislations

• SDC subhect to the provisions of the Securities Law, as well to an integrated system of legislation in terms of internal by-laws, instructions, executive procedures and policies that would determine the controls and provisions for implementing its administrative, financial and technical operations.
• The SDC works continuously to review its legislation according to developments related to its business and developments in the capital market, and it collects feedback on its legislation from capital market institutions and the target group of any legislative amendments from  its members which are public shareholding companies and financial services companies (brokers and custodians).
• The SDC shall amend its legislation to reflect developments required by the needs of the market and its members, without prejudice to the principles of risk management and international standards applied in this field.
   

 Safekeeping, registration, and transferring the ownership of seccurities

Within the framework of the SDC’s endeavor to create a suitable climate to enhance local investments and attract foreign investments, by achieving its goals that achieve safety, effectiveness and guarantee of transactions in the securities market to protect all elements of the Jordanian capital market by doing the following:

• Creating a database for all issuers within the SDC’s electronic system with the aim of regulating the form and method of registering and safekeeping ownership of securities and ensuring the transparency of transactions in the capital market in the Kingdom. During this stage, we are registering the security and introducing the dealers to it, and then updating the records of the securities owners (shareholders) with the issuers through the electronic systems approved by the SDC to which all financial brokers are linked.
• Identifying the investor by giving them the unified investor number (SDC number), which has been approved to prevent any confusion, especially regarding the similarity of names. As for the reference number, which is used for trading purposes only, it is the number given to the investor by the broker for trading purposes and linked to the SDC number, so every investor can deal with any number of brokers by obtaining a reference number for trading purposes from each broker and all these reference numbers remain linked to only one SDC number consisting of ten digits, and the investor only has to remember the SDC number if he wishes to deal with another broker.
• The SDC applies the principle (Know Your Customer-KYC) and exerts due diligence within the anti-money laundering and anti-terrorism policies and procedures used to determine the true identity of the customer.The procedures for identifying investors take into account verification that they are not linked to the national list for money laundering and terrorist financing issued by the competent authorities, in addition that they are not linked to the lists issued by the penalties committees emanating from the resolutions of the Security Council- United Nations.
   

Clearing and Settlement

In order to ensure that the risks of trading securities in the market are reduced, the SDC does the following:

• Managing the “Settlement Guarantee Fund” that was established in accordance with the provisions of the Securities Law as a financially independent legal entity to ensure coverage of the cash deficit and deficits in the securities account of a Fund member in connection with his sales of securities on the market.
• The electronic linking between the SDC’s systems and the stock exchange’s trading system through an electronic system called the Central Control System (CCM) with the aim of improving the technical environment of capital market institutions by controlling trading operations and reducing the risks associated with those operations (Order Verification)
• Linking the SDC’s electronic system with the Real Time Gross Settlements System (RTGS) through the global SWIFT network in order to receive and send for the settlement of securities prices using the latest means in the field of linking and exchanging messages and information with all banks (MX messages – ISO 20022)
• Developing and updating a comprehensive emergency plan in order to guarantee the continuity of operations in all circumstances according to the international standards and best practices. This plan includes an analysis of risks and potential problems to establish a preventive strategy to avoid risks and crises and to cope with them in case they happen.
• Strict procedures for dealing with brokers who do not commit to paying the amounts due for settlement as of day T+1, including suspension of trading to reduce risk and control them.
• Buy in and Sell out measures to ensure delivery of the sold security in exchange for payment of its prices.
• The SDC implemented the international Standard of Delivery versus Payment where delivery of sold securities is against payment of funds.
   

Internal Control

The organizational structure of the SDC includes a department called (the Internal Audit Department) that is linked to the Board of Directors in accordance with the best international regulatory practices, and is entrusted with the following tasks:

• Auditing all operations, activities and procedures in all financial, administrative and technical aspects.
• Submitting periodic and annual supervisory reports to the audit committee emanating from the SDC Board of Directors to issue the necessary recommendations and decisions to address any observations contained in those reports.