Galvan Research and Trading

Galvan has taken the approach to be risk adverse and the firm takes reasonable steps to manage its risks. This is reflected in their low appetite for taking on risk in any of its activities. Risks to income generating capability are mitigated wherever possible and measures against actual and potential operating risks are taken where its Directors judge the benefit or the potential of the mitigation to exceed the costs of the mitigating controls. The same low tolerance to risk is reflected on the cost side of the business with minimal long term cost commitments. Galvan has little to no tolerance for engaging in activity that adversely influences its risk profile. All risks of any significance are identified, assessed and controlled on an on-going basis. The critical material capital adequacy risks for Galvan are outlined below, along with mitigating actions. Market Risk - Market Risk is the risk of any impact upon the firm's financial condition due to fluctuations in values of, or income from, assets or in interest or exchange rates. Decline in value would result in reduction the asset value of Galvan. Key mitigating actions - Senior Management are responsible for ensuring that market risk is regularly taken into consideration. Stress tests involve testing relevant market factors using scenarios that are believed by management to represent possible market events. Stress tests are performed and documented annually or as required by risk management at interim periods. The Director's do not believe there is a significant market risk to Galvan as it is a broker and does not have direct exposure to market movements in asset prices or exchange rates. Reputational Risk - Reputational Risk is defined as the risk of damage to the firm's reputation that could lead to negative publicity, costly litigation, a decline in the customer base or the exit of key employees and therefore, directly or indirectly, a loss of income. Key mitigating actions - The firm monitors on a frequent basis the firm's clients and its reputation. By having systems and controls to monitor any errors and mitigate them as they arise, Galvan can quickly asses any risks arising to their reputation. Senior Management has extensive experience dealing with CFD's and providing high standards of client care. Counterparty Risk - Counterparty Risk is defined as the risk of failure of a counterparty to perform as contracted. Galvan may be exposed to counterparty risk primarily from external service providers. Key mitigating actions - Galvan actively manages Counterparty Risk by diversifying its relationships, executing its business with reputable counterparties and, where applicable, having in place back up counterparties. Credit Risk - Credit risk is defined as the risk that the firm's debts are not collected as they fall due. Key mitigating actions - Galvan manages credit risk by executing its business with highly capitalised counterparties and by entering into arrangements whereby balances are paid down regularly and promptly. Liquidity Risk - Liquidity Risk is defined as the risk of inability to obtain funding, either via liquid assets or short-term borrowing, on a day-to-day basis and particularly in times of stress. Key mitigating actions -Monthly management accounts are prepared and distributed to and reviewed by senior management. Galvan holds excess cash to cover at least three months overheads and the company is cash generative. Operational Risk - Operational Risk is defined as the risk of loss due to system breakdowns, internal and operational control failures, employee fraud or misconduct, and catastrophes. Key mitigating actions - Operational risk is assessed at least annually as part of the Pillar II process and is monitored by the Board. Regulatory and Legal Risk - Regulatory and Legal Risk is defined as the risk that Galvan's activities do not comply with applicable laws and regulations. Key mitigating actions - The Compliance and Risk Officer monitor and manage regulatory and legal risks. These functions report into the Chief Executive Officer ("CEO"). In addition, external counsel and consultants with industry expertise are utilised as needed. Galvan employs legal and compliance firms to ensure they are compliant with regulatory and legal bodies. Business Risk - Business Risk is defined as the risk that Galvan's clients leave, which would have a significant impact on their income. There is steep competition in the market place for CFD firms such as Galvan. Galvan, as a CFD broker generates its income by way of charging a commission fee. Key mitigating actions - Galvan has a wide spread of clients, no single client represents more than 5% of total income and hence there is limited Concentration Risk. Galvan maintains its client base through the quality of its services to its clients. Galvan's client base is not sensitive to the loss of any key staff. The directors and key staff members are experienced in the CFD market and are able to monitor investment decisions when they are made. Litigation Risk - Litigation Risk is defined as the risk that Galvan will be in breach of any fiduciary or other contractual duties which results in extensive litigation. Key mitigation actions - Galvan selects law firm's with industry expertise to draft key contracts and agreements. All documents are vetted and then approved by senior management before being signed by its client's. Interest Rate Risk - Interest Rate Risk is defined as the risk arising from potential changes in interest rates. Galvan is exposed to interest rate risk primarily on its cash balances; however the senior management believe that the exposure is not material.