Zimswitch is responsible for clearing and final settlement of transactions processed through the switch on a daily basis. Clearing refers to the process of transmitting, reconciling and in some cases, confirming transactions prior to the settlement, including the netting of transactions and the establishment of final positions for settlement. Clearing also allows Zimswitch to calculate collateral requirements for participants. Final settlement is achieved when the participants pay off their obligations.
As it can be clearly seen, Zimswitch has the mandate to ensure the financial system is sound by adopting sound risk management processes as participants pose risks to one another. The switching business requires the company to maintain a secure and reliable system that manages legal risk, credit risk, liquidity risk, settlement risk, general business risk and operational risk amongst the key risks. Risk management therefore becomes one of Zimswitch’s core services as it affects the business mission to become a reliable, effective and efficient switch.
Zimswitch therefore only manages risks on behalf of participants and does not assume any of the risks borne by the participants. The following key measures have been adopted by Zimswitch to manage the key risks mentioned above:
Every member bank is required to lodge collateral equivalent to a calculated figure based on monthly transactions. The collateral is only used when a participant defaults settlement. Failure to replenish collateral results in disconnection on Zimswitch. The collateral lodged is calculated based on a formula and adequately covers for days like holidays and long weekends.
Real Time Monitoring of Exposures:
Zimswitch monitors the exposures of all member banks in real time versus their lodged collateral. Where a participant’s exposure reaches or nears their collateral limit, Zimswitch pro-actively engages the affected bank to pre-fund the Zimswitch settlement account to manage perceived settlement defaults.
Adoption of International Standards:
Zimswitch follows international standards as a way of proactively managing risks and such standards include ISO’s, Principle for Financial Market Instruments (PFMI’s) and is also working on implementing PCI DSS and EMV standards.
State of the art Systems:
Zimswitch is technologically driven, hence maintains state of the art systems. It is the company’s responsibility to ensure that it’s technology infrastructure matches first world countries. The systems are continuously upgraded to cater for technological changes and ensure that they remain competitive in serving the member banks expectations.
Risk Management is therefore a key process in the company. Zimswitch continuously identifies, analyses and responds to risks in a timely manner. The proper management of risks implies control of possible future events and being done in a proactive manner than reactive. Risks are always inherent but the magnitude of the impact is what needs to be contained.
Zimswitch is proud to have managed the risks in an acceptable manner over the past years. Risks are always changing and the environment is dynamic. It is because of the robustness of this process that Zimswitch remains relevant to date and operates a reliable, efficient and effective switch.
As we move ahead , we remain committed to being the switch that provides financial excellence and committed to managing the risks on behalf of our participants and the business encounters