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Pre-settlement risk is the possibility that one party in a contract will fail to meet its obligations under that contract, resulting in default before the settlement date. This default by one party would prematurely end the contract and leave the other party to experience loss if they are not insured in some way.

Settlement risk is the risk that arises when payments are not exchanged simultaneously. The simplest case is when a bank makes a payment to a counterparty but will not be recompensed until some time later; the risk is that the counterparty may default before making the counterpayment.

Settlement risk exists when the contributions of both parties to a transaction are not cleared simultaneously. For example, if a U.S. bank or investor purchased euros from a European bank at 2 p.m. EST, the European bank may not be open to settle the transaction until the next day.

Settlement risk carries more impact than just loss of funds or value of the transaction. It can also include loss of customer trust, damage to brand and reputation, and cost associated with crisis management, as well as other business related risks.

Settlement risk is the risk that arises when payments are not exchanged simultaneously. The simplest case is when a bank makes a payment to a counterparty but will not be recompensed until some time later; the risk is that the counterparty may default before making the counterpayment.

Settlement risk carries more impact than just loss of funds or value of the transaction. It can also include loss of customer trust, damage to brand and reputation, and cost associated with crisis management, as well as other business related risks.

Settlement risk is the risk that a counterparty (or intermediary agent) fails to deliver a security or its value in cash as per agreement when the security was traded after the other counterparty or counterparties have already delivered security or cash value as per the trade agreement.

Settlement risk is minimized by the solvency, technical skills, and economic incentives of brokers. Settlement risk can be reduced by dealing with honest, competent, and financially sound counterparties. Unsurprisingly, settlement risk is usually nearly nonexistent in securities markets.