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FINANCIAL MARKET COURSES

Risk Management – An Introduction

Banks are in business in order to generate returns for their stakeholders. To achieve this, they must take risks and embed them in the products and services they provide. Risk management has become ever more important as the complexity of banking has increased and regulators attempt to more closely match capital with risk profiles. From a regulator’s point of view, the most desirable aspect of banking is survivability rather than profitability – and the key to survivability is risk management.

 

This course looks at the links between risk, return, and survival, in addition to outlining the main types of risk that banks face and the key elements of an effective framework for the management of these risks.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain how a bank is a 'risk factory' and how regulators are concerned about survival in the face of these risks

    Describe the fundamentals of the risk management process in a bank

    Outline the major categories of risk that banks must address

  • COURSE OUTLINE

    Topic 1: Risk Return and Survival

    What is Risk

    What is a Bank?

    Banking is Risk Management

    Moral Hazard

    Capital and Survival

    The Capital Conundrum

    Topic 2: Risk Management Framework

    • Organizing Risk Management

    • Risk Police?

    • Identifying, Measure, Manage

    o Risk Identification

    o Risk Measurement

    o Risk Management

    Topic 3: Risk Types

    • Where Does the Risk Come from?

    o Interest Rate Risk

    • Interest Rate Risk – Example

    • Case Study – S&Ls

    o Credit Risk

    • Case Study - WorldCom

    o Market Risk

    o Foreign Exchange Risk

    • Case Study – The Subprime Lending Crisis

    o Liquidity Risk

    • Liquidity Risk vs Solvency Risk

    • Liquidity Risk – Example

    • Case Study – Northern Rock

    o Operational Risk

    • Operational Risk – Key Categories

    • Case Study – Rogue Traders

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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