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Executive Summary "The key findings of this paper can be summarized as follows: - A wave of network-related studies have been undertaken in the wake of the 2008 financial crisis to better understand the role of interconnectedness in the transmission of risks. A major finding of these studies is that financial networks tend to be robust yet fragile, absorbing shocks up to a certain tipping point, beyond which they spread risks rather than contain them. - While the importance of network structures in propagating financial shocks is generally recognized, it remains unclear under which circumstances interconnectedness promotes or impairs financial stability. - Policymakers’ initiatives to address interconnectedness risks focus mainly on increasing the resilience of the most interconnected – and most systemically important – financial institutions. Similar measures have been introduced to enhance the resilience of critical financial market infrastructures. - Identifying and assessing interconnectedness risks promotes a broader and deeper understanding of the threats to an organization. The paper proposes a set of practical guidelines for practitioners who wish to adopt this approach as a way to manage risks more holistically across organizational silos. - In line with this comprehensive and inclusive approach, DTCC is working closely with market participants on several initiatives that are designed to mitigate industrywide interconnectedness risks and proactively address related policy directives."

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