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Abstract

Counterparty risk involves the potential for a counterparty to fail in fulfilling their obligations in an agreement or transaction. It also includes the risk of a third party acting illegally on Endaoment’s behalf without our knowledge or engaging in corrupt practices. This risk is categorized into two main areas: offchain and onchain. Offchain pertains to traditional transactions with brokerages, firms, or vendors, while onchain refers to transactions executed on a blockchain. Effective management of these risks is essential to maintain the integrity of our operations and the trust of our stakeholders.

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Policy Statement

Endaoment is committed to providing financial tools that ensure definitive settlement through the use of blockchain technology while adhering to all applicable anti-corruption statutes. We manage counterparty and anti-corruption risks through regular counterparty analysis and comprehensive code audits and reviews. Compliance with this policy is mandatory for all employees, contractors, board members, and representatives acting on behalf of Endaoment.

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Risk Management Strategy

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Risk Assessment

1. Due Diligence Procedures

   • Conduct comprehensive due diligence on all potential and existing partners, vendors, and stakeholders to assess their risk levels concerning counterparty and anti-corruption risks.

2. Political Exposure Analysis

   • Evaluate interactions with government officials or entities to identify and mitigate risks related to political exposure.

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Risk Mitigation

1. Ethical Guidelines

   • Implement and enforce comprehensive ethical guidelines and a Code of Conduct that explicitly prohibit corrupt practices in all forms.

2. Financial Controls

   • Establish robust financial controls, including transparent accounting procedures and regular audits, to prevent and detect corrupt practices.

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Monitoring and Reporting

1. Compliance Monitoring

   • Continuously oversee business practices and transactions to ensure adherence to counterparty and anti-corruption policies.

2. Incident Reporting Mechanism

   • Provide a secure and anonymous system for reporting suspected counterparty failures or corrupt activities.

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Operational Controls

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Policies and Procedures

• Documentation
  • All counterparty risk management policies and procedures are thoroughly documented, with both internal and external-facing components where relevant.
• Annual Review
  • Conduct an annual review of policies, updating them as necessary to reflect current best practices and regulatory changes.

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Onchain Diligence and ABAC Assessment

• Evaluation Process
  • All onchain partners must undergo an evaluation process that assesses their public reputation, history of reliability, past activities (including any incidents of hacks or data breaches), and, if applicable, the integrity of their smart contracts, tokens, and other onchain infrastructure.

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Offchain Diligence and ABAC Assessment

• Evaluation Process
  • All offchain partners must undergo an evaluation process that assesses their public reputation, history of reliability, and past activities (including any incidents of hacks or data breaches).

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Vendor Management

• Compliance Standards
  • Implement stringent controls and regular reviews of vendor relationships to ensure compliance with Endaoment’s counterparty and anti-corruption standards.

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Segregation of Duties

• Role Segregation
  • Ensure that critical procedures and systems have segregated duties to prevent any single individual from having full control over any process without oversight.
• Approval Processes
  • Maintain segregated claim diligence and approval processes to uphold checks and balances.