Financial Risk Management - Methods, Tools, Principles and Regulation

Key points / questions answered:

• What are the objectives of risk management in banks?
• How to identify and classify risks?
• What can we learn from passed crises and defaults?
• Can all risks be measured? What if they can't?
• What is expected from the risk managers?
• How to measure and aggregate risks?
• Will the regulatory and the economic approaches converge?
• When is risk-taking profitable?
• What are the current issues in risk management?

The goal of this seminar is to identify and uncover the nature of the risks banks are facing. We start with a brief history of risk management, from the Chevalier de Méré and his taste for money games to the build-up of the modern risk framework and quantitative measurement techniques. This path is littered with trial and errors that have led to crises and catastrophes, some of which are reviewed and analyzed. We then classify the risks and discover how to hunt for new, emerging ones. From there, we study the theoretical foundations of risk measurement and how they are translated into the regulatory and the economic frameworks. As both frameworks coexist in banks, we spend some times understanding their differences and how they articulate.

We then look at the techniques used for measuring risks. They rest on a limited number of simple and powerful principle which translate into techniques adapted to each risk type: credit, market and operating risks. Diverse techniques are explained to assess multiple risk measures that are complementary and need to be articulated. The issue of how to aggregate risks is addressed at this point. A number of exercises and games will facilitate assimilating these principles and techniques.

Further, we addresses the management of risks: You learn how to control and mitigate them, and a number of key issues are addressed: Which risks are profitable and should then be taken, which are not? What are risk budgeting and risk appetite? How to price risk properly? What is expected from Risk Management professionals and how do they relate to other functions in the bank? Finally we address the most pressing risk issues banks are currently facing: How to deal with the increasing regulatory pressure? How to fulfill the new resolution constraints? What impact of IFRS 9? How will Fintech transform the way banks handle their risks?

We finish the seminar with a series of exercises/games aimed at rehearsing all the major elements learned during the six half-days: Risk identification, measurement and aggregation; risk control, mitigation and management; and finally risk-return issues and current concerns.

Host or Publisher MONECO Financial Training