Crafting Success in the Crypto Universe

Thanks to OCSC Platinum Sponsor Withum for this valuable information about the technology industry:

Navigating Risk: Best Practices for Managing Crypto and Digital Asset Investments

The crypto and digital asset market operates 24 hours a day, 7 days a week, 365 days a year.

Without proper risk management, institutional firms become susceptible to the risk of financial loss by way of misappropriation of assets.

Three Key Risk Areas

Here are three key risk areas both individuals and organizations should be aware of for best practice and proper risk management.

Counterparty Risk

Counterparty risk is the possibility of financial loss due to one party in a transaction not fulfilling its contractual obligations. Institutions can reduce this risk through diversification of their custodial, trading, and exchange relationships. Knowing your counterparties and how they operate and having more than just one also helps reduce counterparty risk. Institutions may want to consider each of the following:

Diversify the crypto exchanges on which your organization trades. If one exchange closes its doors, you have alternatives. Additionally, many exchanges offer similar tokens and trading options, so there are multiple exchange options available to users.
Trade only with trusted and reputable counterparties. Never send digital assets to a wallet address you don’t know and have verified with the ultimate recipient.
Perform due diligence procedures on each counterparty. Understand the policies, procedures, and insurance policies (if any) they have in place.
Maintain a good working relationship with contacts at each counterparty. Ask questions to ascertain how healthy or unhealthy the counterparty’s business is.
Know who your counterparties work with. If a counterparty significantly depends on one or two other parties, it could...

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