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 Duration 35 hours

Course Outline

Fundamentals of Risk

  • Defining risk and the rationale for its management in banking
  • Beyond downside: Is risk solely a negative experience?
  • The global nature of banking and associated risks
  • Overview of key risk categories in banking
  • Consequences of ineffective risk management
  • Risk Appetite
  • Risk Management Principles

Case Study

International Regulatory Frameworks

  • Understanding risk-based regulations
  • The nexus between risk and capital
  • The concept of capital adequacy
  • Key international regulatory standards
    • Basel Accords
    • Sarbanes-Oxley Act

Case Study

The Basel Accords in Detail

  • Evolution of international banking risk regulation
  • Objectives of banking risk frameworks
  • Challenges posed by global regulation
  • Basel I Accord and the Market Risk Amendment
  • Basel II Accord
  • Capital requirements under Basel II
  • Basel 2.5 and Basel III
    • Leverage ratio
    • Countercyclical capital buffer
    • Systemic interconnectedness

Case Study: Capital requirements under Basel III

Market Risk

  • Defining market risk
  • Market activities and trading rationale
  • Primary market instruments
    • Cash instruments
    • Derivative instruments
  • Strategies for managing market risk
  • Measurement and management of market risk
  • Regulatory oversight of market risk
    • Basel II
    • Basel III

Case Study: Implications of poor market risk management – JP Morgan

Credit Risk

  • Understanding credit risk
  • Credit products in international markets
  • Mitigation and management of credit risk
  • The credit decision process
  • Credit analysis methodologies
  • Portfolio management
  • Measurement of credit risk
  • Regulatory standards for credit risk
    • Basel II
    • Basel III

Case Study

Operational Risk

  • Defining operational risk and its significance
  • Expected and unexpected loss profiles
  • Categorization of operational risk events
  • The three lines of defense model
  • Operational risk management principles
  • Framework for operational risk management
  • Initial steps in implementation
  • Reporting lines for operational risk management
  • Scope of operational risk management
  • Assessment and measurement techniques
  • Regulatory standards for operational risk
    • Basel II
    • Basel III

Case Study: UBS

Liquidity Risk

  • Understanding liquidity risk
  • Forms of liquidity
  • Impacts of inadequate liquidity management
  • Sources of liquidity
  • Liquidity measurement
  • Stress testing
  • Liquidity management strategies
  • Regulatory standards for liquidity risk
    • Basel II
    • Basel III

Case Study:

Asset and Liability Management (ALM) and Other Risks

  • Principles of Asset and Liability Management
  • ALCOs and Treasury functions
  • Banking book versus Trading book
  • Interest rate risk in the banking book
  • Measurement and management of IRRBB
    • Contractual vs. behavioral perspectives
    • Stress testing
  •  ‘Other’ risk categories

Case Study:

Supervision & Disclosure

  • Concepts of supervision and disclosure
  • Home/host supervisory cooperation
  • The ICAAP process
  • Supervision and disclosure under Basel frameworks
  • Changes introduced by Basel III

Case Study:

Defining Enterprise Risk Management (ERM)

  • What is ERM?
  • Advantages of ERM
  • The ERM process
  • Role of the risk management function
  • Portfolio management in ERM
  • New product development and risk
  • Basel Committee guidance
  • Commonly used ERM frameworks

Case Study

Integrated Risk Management

  • Integrating risk across the bank
  • Role of risk committees
  • Formulating risk policies
  • Identifying and assessing risks
  • Aggregating risk across different types
  • Economic capital calculation
  • Interactions between risk types

Case Study

Corporate Governance

  • Defining corporate governance
  • Stakeholder identification and conflict resolution
  • Benefits of effective corporate governance
  • Evolution of corporate governance – Cadbury, Walker, and Hicks reports
  • External perspectives on governance (rating agencies, regulators)

Case Study: Can a bank be “Too big to manage”?

Best Practices in Corporate Governance

  • Corporate structural designs
  • Role of non-executive directors
  • Techniques and strategic approaches
  • Committee structures and management practices
  • Communication strategies
  • Responsibilities of senior management
  • Internal governance frameworks
  • OECD and Basel guidance

Case Study:

Risk Governance

  • Governance of risk management
  • Cultivating risk awareness
  • Embedding a risk culture
  • Establishing risk management committees
  • Aligning governance, risk, and compliance

Case Study:

Future Outlook

  • The new regulatory landscape
    • Impact on the banking industry
    • Impact on regulators
  • Key priorities in the global banking regulatory agenda
  • Potential future risk areas

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