Staff of the Commodity Futures Trading Commission’s Division of Clearing and Risk issued guidance to derivatives clearing organizations regarding their obligation to maintain “viable plans” for their recovery and orderly wind-down, following a major adverse financial event, or any risk that threatens their ongoing existence. This obligation exists for all DCOs that have been designated “systematically important” by the Financial Stability Oversight Counsel or have voluntarily elected to be treated as a systematically important DCO. According to staff, “the development of a Recovery Plan and … Wind-down Plan are critical elements of risk management and contingency planning to address the extreme circumstances that could threaten a DCO’s viability and financial strength.” In its guidance, staff recommend that DCOs address 11 elements in their recovery and wind-down plans including scenarios; recovery tools, wind-down scenarios and options; interconnections and interdependencies; agreements to be maintained during recovery and wind-down; financial resources; governance; notifications; assumptions; updates; and testing. In considering scenarios, staff recommend that DCOs evaluate both credit loss and liquidity shortfall scenarios, and general business risk and operational risk scenarios such as a settlement or custodian bank failure; losses from investments, a legal matter, or a cybersecurity event; poor business results; and losses “from interconnections and interdependence among the DCO and its parent, affiliates, and/or internal or external service providers.”