Risk Management Training
Risk is often acceptable as long as institutions can measure & understand it.

Every department of a financial institution is involved in monitoring, analyzing, or managingsome form of risk.

One Day Programme

Fundaments of Risk Management



Risk Management Fundamentals 0.30 hrs
  • What is risk?
  • What is “risk appetite” & why different institutions are comfortable with different levels of risk?
  • How does monitoring profits and losses give an indication of risk?
  • Why just tracking profits and losses gives an incomplete picture of risk?
  • The concept of risk transfer.
  • The goal is not always eliminating risk but taking the appropriate level of risk
FORMS OF RISK FINANCIAL INSTITUTIONS
Market Risk of potential valuation changes 2 .0 hrs
  • fixed income (interest rates and spread risks)
  • equity portfolios
  • derivatives positions (across various markets)
Liquidity Risk 0.30 hrs
  • Inability to sell certain assets
  • Inability to refinance portfolios or meet obligations
Credit Risk 0 .30 hrs
  • Counterparty/obligor
  • Industry/Sector
  • Geographical region
  • Direct exposure vs. potential exposure
  • Debt seniority
Operational Risk of loss resulting from 1.0 hrs
  • inadequate or failed internal processes,
  • people and systems
  • valuation model failure
  • external non-credit or market events
  • case studies
Regulatory Risk Issues 1.0 hrs
Securities regulator (SEBI)
  • Governance/Compliance /Controls
  • Unauthorized transactions/business practices
  • Insider Trading Rules
  • Anti Money Laundering ( AML)
  • KYC ( Know Your Customer)
  • Accounting issues / Reporting
  • Importance of internal audit
Managing Portfolio 1.0 hrs.
Trading Portfolio
  • Notional Limits (bond equivalents, futures equivalents, dollar equivalents)
  • Sensitivity Limits (DV01, CS01, option greeks)
  • VAR limits / Span Margins
  • Trader limits vs. desk or group limits
  • Limit allocation and monitoring
  • Product concentration limits
  • Common risk management practices in various markets
Risk Measurement Techniques 2.0 hrs.
  • Measuring basic sensitivities (DV01, CS01, directional F/X, equity beta)
  • Statistical Measures: VAR
    • Variance/Covariance
    • Historical Simulation
    • Monte Carlo
  • Non-linear risks
  • Effects of diversification: market vs. specific risk
  • Scenario analysis and portfolio stress testing
Class room Exercise 1.0 hrs.
Case Study Black Monday Analysis 1.0 hrs.
Two Days Programme

Risk Management



DAY 1
Risk Management Fundamentals 1 Hour
  • What is risk?
  • What is “risk appetite” & why different institutions are comfortable with different levels of risk?
  • How does monitoring profits and losses give an indication of risk?
  • Why just tracking profits and losses gives an incomplete picture of risk?
  • The concept of risk transfer.
  • The goal is not always eliminating risk but taking the appropriate level of risk
FORMS OF RISK FINANCIAL INSTITUTIONS FACE
Market Risk of potential valuation changes 2 Hours
  • fixed income (interest rates and spread risks)
  • equity portfolios
  • derivatives positions (across various markets)
Liquidity Risk 1 Hours
  • Inability to sell certain assets
  • Inability to refinance portfolios or meet obligations
Credit Risk
  • Counterparty/obligor
  • Industry/Sector
  • Geographical region
  • Direct exposure vs. potential exposure
  • Debt seniority
Information Risk 1 Hour H
  • Introduction to Information Risk
DAY 2
Operational Risk of loss resulting from 1. Hour
  • inadequate or failed internal processes,
  • people and systems
  • valuation model failure
  • external non-credit or market events
  • case studies
Regulatory Risk Issues 2 Hours
Securities regulator (SEBI)
  • Governance/Compliance /Controls
  • Unauthorized transactions/business practices
  • Insider Trading Rules
  • Anti Money Laundering ( AML)
  • KYC ( Know Your Customer)
  • Accounting issues / Reporting
  • Importance of internal audit
Managing Portfolio 1 Hour
Trading Portfolio
  • Notional Limits (bond equivalents, futures equivalents, dollar equivalents)
  • Sensitivity Limits (DV01, CS01, option greeks)
  • VAR limits / Span Margins
  • Trader limits vs. desk or group limits
  • Limit allocation and monitoring
  • Product concentration limits
  • Common risk management practices in various markets
Business Continuity 1 Hour
  • Introduction to Business Continuity
Risk Measurement Techniques 2 Hours
  • Measuring basic sensitivities (DV01, CS01, directional F/X, equity beta)
  • Statistical Measures: VAR
    • Variance/Covariance
    • Historical Simulation
    • Monte Carlo
  • Non-linear risks
  • Effects of diversification: market vs. specific risk
  • Scenario analysis and portfolio stress testing
Class room Exercise 1.0 hrs.
Case Study Black Monday Analysis 1.0 hrs.
Three Days Programme

Risk Management and Applications



Risk Management Fundamentals 1.0 hrs
  • What is risk?
  • What is “risk appetite” & why different ins. are comfortable with different levels of risk?
  • How does monitoring profits and losses give an indication of risk?
  • Why just tracking profits and losses gives an incomplete picture of risk?
  • The concept of risk transfer.
  • The goal is not always eliminating risk but taking the appropriate level of risk
Forms of Risk Financial Institutions Face
•Credit Risk 2 .0 hrs
  • Counterparty/obligor
  • Industry/Sector
  • Geographical region
  • Direct exposure vs. potential exposure
  • Debt seniority
Operational Risk of loss resulting from 1.0 hrs
  • inadequate or failed internal processes,
  • people and systems
  • valuation model failure
  • external non-credit or market events
  • case studies
•Market Risk of potential valuation changes 2 .0 hrs
  • foreign exchange
  • commodities
  • fixed income (interest rates and spread risks)
  • equity portfolios
  • derivatives positions (across various markets)
Liquidity Risk 0.30 hrs
  • Inability to sell certain assets
  • Inability to refinance portfolios or meet obligations
Strategic Risk 0.30 hrs
  • arising from adverse business decisions or the improper implementation of such decisions.
  • Reputation Risk arising from negative public opinion:
  • failures of process
  • failures of strategy
  • failures of corporate governance.
Regulatory Risk Issues 0.30 hrs
  • Securities regulators, bank regulators, rating agencies, exchanges
  • Governance/Controls
  • Unauthorized transactions/business practices
  • Accounting issues
  • Capital adequacy
  • Legal/Compliance
  • AML
  • Financial reporting/SOX
  • Tax
  • Importance of internal audit
Managing Bank's Portfolio 5.0 hrs
Credit portfolio
  • Tracking concentrations
  • Setting and tracking limits by
    • Name
    • Seniority (secured vs. unsecured)
    • Industry/Sector, Region
  • Using credit derivatives and risk transfer
Investment Portfolio
  • Private Equity
  • Real Estate
  • Hedge funds
  • Liquidity Issues
  • Capital/Balance Sheet limits
Trading Portfolio
  • Notional Limits (bond equivalents, futures equivalents, dollar equivalents)
  • Sensitivity Limits (DV01, CS01, option greeks)
  • VAR limits
  • Trader limits vs. desk or group limits
  • Limit allocation and monitoring
  • Product concentration limits
  • Common risk management practices in various markets
Bonds
Derivatives
  • Swaps and other FI derivatives
  • Equities and equity derivatives
FX and Money Markets
Commodities
Asset/Liability Management 3.00 hrs.
  • Financing various portfolios based on liquidity/term
  • Managing unfunded commitments
  • Monitoring liquidity and regulatory capital
Risk Measurement Techniques 3.0 hrs.
  • Measuring basic sensitivities (DV01, CS01, directional F/X, equity beta)
  • Statistical Measures: VAR
    • Variance/Covariance
    • Historical Simulation
    • Monte Carlo
    • Back-testing statistical models against P&L
  • Non-linear risks
  • Effects of diversification: market vs. specific risk
  • Scenario analysis and portfolio stress testing
  • Stress testing derivatives pricing models
  • Addressing concentrated positions/risks
  • Application to regulatory capital (Basle Accord Internal Model approach)
  • Default probability/LGD based credit models
  • Combining Market and Credit risks into Economic Risk Capital (ERC)
  • Loss distributions (for Operational and Credit risks)
  • Enterprise-wide risk management systems and processes
    • Aggregation of position/exposure data across the firm
    • Why are risk systems different from P&L systems (risk is not additive)
Quality of Returns (Risk vs. Return) 1.0 hrs
  • Allocating Economic Risk Capital to businesses and portfolios
  • Return on ERC and RORAC
  • Required return on capital threshold for investment/lending decisions
  • Return on regulatory capital vs. economic capital
  • Capital allocation as a strategic tool