# Risk Management Strategies

Defx employs several strategies to manage and mitigate these risks:

* **Comprehensive Smart Contract Audits:** Periodic self as well as third-party audits to identify and rectify vulnerabilities.
* **Regulatory Monitoring:** Defx periodically audits regulatory developments to ensure compliance with relevant laws in the territories our exchange is available to operate in.
* **Liquidity Incentives:** Encouraging market makers to provide liquidity, thereby reducing the risk of significant price slippage.
* **Reducing latency while hedging:** With a combination of colocating DLE with the validator as well as centralised exchanges, and monitoring latency associated with hedging, the risk of DLE's drawdown is minimised.