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An introduction to risk

• What is risk and why should banks manage it?
• Is risk just a downside experience?
• The global nature of banking and risks
• An introduction to the major types of risk in banks
• The potential consequences of failing to manage risks in banks
• Risk Appetite
• Risk Management

Case study

International risk regulations

• What are risk-based regulations?
• Linking risk with capital
• What is capital adequacy?
• Key international regulations
  • Basel Accord
  • Sarbanes-Oxley

Case Study

The Basel Accords

• The development of international banking risk regulation
• The objectives of banking risks
• The challenge of global regulations
• The Basel I Accord and the Market Risk Amendment
• The Basel II Accord
• Capital under Basel II
• Basel 2.5 and Basel III
  • The leverage ratio
  • Countercyclical capital buffer
  • Systemic interconnectedness

Case study: Capital under Basel III

Market risk

• What is market risk?
• Market activities and why trade
• The main market instruments
  • Cash instruments
  • Derivative instruments
• Managing market risk
• Market risk measurement and management
• Market risk regulation
  • Basel II
  • Basel III

Case study: The consequences of mis-managing market risk – JP Morgan

Credit risk

• What is credit risk
• Credit products in an international market
• Mitigating and managing credit risk
• The credit process
• The credit analysis process
• Portfolio Management
• Credit risk measurement
• Credit risk regulation
  • Basel II
  • Basel III

Case study

Operational risk

• What is operational risk and why is it important?
• Risk of loss, expected and unexpected losses
• Operational risk event types
• Three lines of defence
• Operational risk management
• Operational risk management framework
• Where to start?
• Who does operational risk management report to?
• What is included under operational risk management?
• Measuring and assessing operational risk.
• Operational risk regulation
  • Basel II
  • Basel III

Case study: UBS

Liquidity risk

• What is liquidity risk?
• Types of liquidity
• Consequences of not managing your liquidity
• Sources of liquidity
• Measuring liquidity
• Stress testing
• Managing liquidity
• Liquidity risk regulation
  • Basel II
  • Basel III

Case study:

Asset and Liability Management and other risks

• What is Asset and Liability Management
• ALCOs and Treasuries
• Banking book verses Trading Book
• Interest rate risk in the banking book
• Measuring and managing IRRBB
  • Contractual verses behavioural
  • Stress testing
•  ‘Other’ risks

Case study:

Supervision & disclosure

• What is supervision and disclosure
• Home/host supervisory co-operation
• The ICAAP
• Supervision and disclosure under Basel
• The Basel III changes

Case study:

Defining Enterprise Risk Management

• What is ERM?
• The benefits of ERM
• The ERM process
• The risk management function
• Portfolio management
• New product development
• Basel Committee guidance
• Commonly adopted frameworks

Case study

Integrated risk management

• Integrating risks across the bank
• Risk committees
• Risk policies
• Risk recognition and assessment
• Adding risk across risk types
• Economic capital
• Interaction between risk types

Case study

Corporate Governance

• What is corporate governance?
• Who are the stakeholders and what are the conflicts between them?
• What are the benefits of good corporate governance?
• Development of corporate governance - Cadbury, Walker, Hicks reports
• The external view of Corporate Governance (rating agencies, regulators)

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

Good corporate governance

• Corporate structures
• The role of non-executive directors
• Techniques and strategies
• Committees and management practices
• Communication
• The role of senior management
• Internal framework of Corporate Governance
• OECD and Basel guidance

Case study:

Risk Governance

• Risk management governance
• Creating a culture of risk awareness
• Implementing a risk culture
• Risk management committees
• Governance, risk and compliance

Case study:

The future

• The new regulatory regime
  • Implications for the banking industry
  • Implications for regulators
• Priorities in the global banking regulatory agenda
• Future flashpoints