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Course Outline

An introduction to risk

  • Defining risk and the necessity for institutional risk management
  • Understanding risk beyond negative outcomes
  • The global scope of banking operations and associated risks
  • Overview of primary risk categories within financial institutions
  • Implications of inadequate risk management in banking
  • Risk Appetite Frameworks
  • Risk Management Principles

Case study

International risk regulations

  • Foundations of risk-based regulatory frameworks
  • Relationship between risk exposure and capital requirements
  • Definition and importance of capital adequacy
  • Key international regulatory standards
    • Basel Accords
    • Sarbanes-Oxley Act

Case Study

The Basel Accords

  • Evolution of international banking risk regulation
  • Primary objectives of banking risk oversight
  • Challenges associated with harmonizing global regulations
  • Basel I Accord and the Market Risk Amendment
  • Basel II Accord framework
  • Capital requirements under Basel II
  • Basel 2.5 and Basel III enhancements
    • Leverage ratio standards
    • Countercyclical capital buffer
    • Systemic interconnectedness controls

Case study: Capital requirements under Basel III for government-regulated entities

Market risk

  • Definition and scope of market risk
  • Trading activities and market participation
  • Primary financial instruments
    • Cash market instruments
    • Derivative instruments
  • Strategies for managing market risk
  • Measurement and management methodologies for market risk
  • Regulatory oversight of market risk
    • Basel II provisions
    • Basel III provisions

Case study: Consequences of inadequate market risk management – JP Morgan

Credit risk

  • Definition and scope of credit risk
  • Credit products in the international marketplace
  • Mitigation strategies and credit risk management
  • The credit approval process
  • Credit analysis methodology
  • Portfolio management techniques
  • Credit risk measurement models
  • Credit risk regulatory standards
    • Basel II provisions
    • Basel III provisions

Case study

Operational risk

  • Definition and significance of operational risk
  • Expected versus unexpected loss profiles
  • Classification of operational risk events
  • The three lines of defense model
  • Operational risk management approaches
  • Operational risk management framework components
  • Implementation pathways for operational risk controls
  • Reporting structures for operational risk management
  • Scope of operational risk management activities
  • Measurement and assessment of operational risk
  • Operational risk regulatory standards
    • Basel II provisions
    • Basel III provisions

Case study: UBS

Liquidity risk

  • Definition and scope of liquidity risk
  • Types of liquidity constraints
  • Consequences of failing to manage liquidity effectively
  • Sources of institutional liquidity
  • Liquidity measurement metrics
  • Stress testing methodologies
  • Strategies for managing liquidity
  • Liquidity risk regulatory standards
    • Basel II provisions
    • Basel III provisions

Case study:

Asset and Liability Management and other risks

  • Definition of Asset and Liability Management (ALM)
  • Role of Asset-Liability Committees (ALCOs) and Treasury functions
  • Differences between Banking Book and Trading Book
  • Interest rate risk in the banking book (IRRBB)
  • Measurement and management of IRRBB
    • Contractual versus behavioral cash flows
    • Stress testing applications
  • Assessment of residual risk categories

Case study:

Supervision & disclosure

  • Principles of supervision and financial disclosure
  • Coordination between home and host supervisory authorities
  • The Internal Capital Adequacy Assessment Process (ICAAP)
  • Supervisory and disclosure requirements under Basel standards
  • Updates introduced by Basel III

Case study:

Defining Enterprise Risk Management

  • Concept of Enterprise Risk Management (ERM)
  • Benefits of implementing ERM
  • The ERM lifecycle and process
  • Structure and role of the risk management function
  • Risk-informed portfolio management
  • Risk integration in new product development
  • Guidance from the Basel Committee on Banking Supervision
  • Industry-standard ERM frameworks

Case study

Integrated risk management

  • Cross-institutional risk integration strategies
  • Function of risk committees
  • Formulation of enterprise-wide risk policies
  • Risk identification and assessment protocols
  • Aggregation methodologies across risk categories
  • Economic capital allocation
  • Interdependencies between distinct risk types

Case study

Corporate Governance

  • Definition of corporate governance standards
  • Stakeholder dynamics and conflict resolution
  • Advantages of effective corporate governance
  • Historical development – Cadbury, Walker, and Hicks reports
  • External perspectives from rating agencies and regulators

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

Good corporate governance

  • Organizational structures supporting governance
  • Role of non-executive directors
  • Governance techniques and strategic approaches
  • Committee structures and management practices
  • Communication protocols for governance entities
  • Responsibilities of senior management
  • Internal components of corporate governance frameworks
  • OECD and Basel guidelines on governance

Case study:

Risk Governance

  • Governance structures for risk management
  • Cultivating a culture of risk awareness
  • Implementation of enterprise-wide risk culture
  • Composition and function of risk management committees
  • Integration of governance, risk, and compliance functions

Case study:

The future

  • Evolving regulatory landscape
    • Impact on the banking industry for government oversight
    • Implications for regulatory bodies
  • Priorities in the global banking regulatory agenda
  • Anticipated regulatory flashpoints
 35 Hours

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