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Transaction risk exists in all types of products and services. A characteristic of
asset management is a high volume of various types of transactions,
particularly securities transactions. The processing of securities transactions
must be accurately and timely executed and recorded for each account.
Income from investments must be credited to the accounts and then properly
disbursed to the account holders. Account statements and reports must be
generated to the interested parties, including account holders, courts, and
federal agencies. Many banks outsource transaction processing and financial
record keeping to third-party vendors. Some examples of issues that could
raise an institution’s level of transaction risk are
- Deficient information processing, accounting, reconcilement, and
reporting systems in relation to transaction volume and complexity.
- Deficient operating processes and internal controls over information
systems and accounting records, particularly during system conversions.
- Inadequate disaster contingency planning for information systems.
- Failure to effectively manage third-party vendors
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Risk Item: Transaction Risk
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Instrument