The Assembly of Depositors presents the management report and progress of the DCV Evolution project

VIGILANCE COMMITEE OF DCV PRESENTED THE MANAGEMENT REPORT FOR THE YEAR 2018 AT THE XXIV ASSEMBLY OF DEPOSITORS.

WITH A 96.7% DEGREE OF EFFECTIVENESS, 100% COVERAGE OF DEMATERIALIZED INSTRUMENTS AND 100% COMPLIANCE WITH OBLIGATIONS, THE VIGILANCE COMMITTEE CLOSED THE 2018 YEAR.

On March 15th, the Vigilance Committee of the Depósito Central de Valores (DCV) presented at the XXIV Assembly of Depositors, the management report and the activities that were carried out in the 2018 period.

Hugo de la Carrera, Chairman of the Committee, outlined the general points of the report and the work plan for the year 2018, where the study of the sample size of DCV’s financial audit procedures stood out; the direct negotiation process aimed at carrying out an evaluation of the internal control system, and progress of DCV’s Project Evolution; a project that will modernize the systems linked to custody and settlement services of the company.

The most relevant specific activities carried out by the Vigilance Committee correspond to the analysis of the internal control environment, measurement of instruments under custody, evaluations, studies and reviews of physical facilities, security procedures and communications. Also, the follow-up of the work of internal audit, the evaluation of the business continuity plan, monitoring of the compliance level of obligations, review of the risk models and service quality levels.

Regarding operational continuity, DCV’s daily volume monitoring of transactions continued. The foregoing, in order to know and be constantly informed of important changes that could cause alterations in the normal flow of operations. Likewise, reports of critical operational incidents that occurred during the year were analyzed, with the purpose of being informed, while contributing recommendations that are deemed relevant for better resolution of the problems detected.

In this sense, despite the pending situations that require solutions, the risk of errors or irregularities having significant impact for depositors is controlled. The foregoing validates DCV’s current business continuity plan, which defines efficiently the logistics for recovering and restoring critical functions that may be interrupted in an unwanted manner by an incident.

Analysis of the internal control environment

Through an external audit company, the relevant processes and subprocesses of the company regarding the custody and transfer of assets were identified. In this process, relevant risks were identified by DCV while others were identified by the Vigilance Committee. The Company selected those controls that had higher inherent risks and those that had low or moderate residual risks in order to test them. For the 304 key controls that were tested, a 96.7% degree of compliance was detected, which was considered adequate.

In short, and as a conclusion to all this work, according to the auditors’ opinions (having reviewed the different areas, such as governance, risk and compliance) DCV shows a 96.7% effectiveness in the tested controls.

With regards to reviewing compliance with the obligations of depositors, 100% compliance was obtained (in relation to the expiration of deposit agreements).

With respect to the finance audit program for verifying the instruments of the year, this program reviewed physical and dematerialized instruments; it verified the accuracy and scope of the accounts of depositors. Similarly, additional procedures to the financial audit were maintained. To date, as part of the 3 processes carried out during the months of June, September and December, all the documentation supporting the issuance of the new instruments was reviewed up to December 2018, thus maintaining 100%coverage of the dematerialized instruments present in the year.

DCV Evolution

Fernando Yáñez, DCV’s General Manager, presented details of the DCV Evolution project at the XXIV Assembly of Depositors. “The Company is constantly renewing itself, and we believe that after 26 years of operations of DCV’s core system, it was time to renew ourselves in order prepare for new times of transformation, times for adding value, new technologies and new services that could eventually be delivered by DCV”.

Three years ago, DCV initiated a plan for renewing the computer system that included a review process, search and solutions approach. We have been working with Nasdaq for a year and a half on an emblematic project called “DCV Evolution”, which should be underway and operating by mid next year.

With this project our goal is to not impact clients. Everything that involves exchanging data in bulk through files is not changed, therefore, we have made efforts so that the new system could process the data through the same mechanism that clients use today. However, there will be modifications in the graphical interface.

Yáñez referred to the DCV Evolution project as “the greatest effort” DCV has made over the years, in terms of cost and time. To date there have been two releases of the system, Beta 0 and Beta 1. By the end of this year, Beta 4 is expected, which will have all the functionalities that are now in the core system that depositors already know.

“It’s a year where we will be very in touch with you,” Yáñez added, when referring to depositors. “As we receive the versions of the system we will be communicating and looking for ways to train our clients in the functionalities and formats that the new system will deliver.”

Finally, Yáñez remembered 2018 as a dangerous year for the financial market considering the cyber-attacks that took place. As a result of everything that happened in the market, DCV further strengthened its cybersecurity plan by working intensively on the installation of new technological components, both hardware and software. “Today we are operating at a quality and security level quite high in relation to the market.”

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