Risk Management Certificate(RMC) IBS

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					Page # 1   Risk Management Certificate(RMC)
                                        IBS
            Risk Management
           is a Process of Taking
 Calculated Risks not Avoiding
                     Risks

              "Carl Olsson, Global Risk Management, SCB"




Page # 2                           Risk Management Certificate(RMC)
                                                                IBS
           Risk Management Certificate
                    (RMC)
                                Index:

           Program Objectives                 Page 4

           Brief Outline of the Program       Page 5

           Introduction to Risk Management    page 6

           Market Risk                        Page 8

           Liquidity Risk                    page 11

           Operational Risk                  Page 13

           Credit Risk                       Page 17

           Islamic Banking                   Page 20

           Supervision and Regulation        page 21

           Program Duration and Details      Page 22

           Administration                    Page 23




Page # 3                                      Risk Management Certificate(RMC)
                                                                           IBS
Program Objectives

1   To understand the nature of risks, its sources and how it affects
    banks/organizations.

2   To familiarize participants with concepts, techniques and principles of
    risk management.

3   To develop risk thinking and apply knowledge to practical changes
    within the banks/organizations.

4   To provide the management with risk related information vital for
    decision making

5   To learn about the different risks involved while managing transactions

6   To know how to handle Islamic Products and risks associated with such
    products

7   To gain a practical understanding of the Risks and Controls inherent
    within Islamic Banking

8   To comply with rules and regulations, local and international,
    applicable to risks management and assist all divisions bank-wide to
    manage risks within their area




Page # 4                                                 Risk Management Certificate(RMC)
                                                                                      IBS
                          Risk Management Certificate
                                       Outline of Program

           Topics                              Subject                              Duration
                    1   - Introduction to Risk Management                          12 Hrs
             A
                        - Basel Directives
                    1    Market Risk                                               18 Hrs
                              Interest
                              Foreign Exchange, etc.
                              Traded and Proprietory Risk
                              Market Risk Ratios
                              Systems
                              Models

                    2   Liquidity Risk                                             18 Hrs
                            The Role of ALCO
                            Asset/Liability Management
                            Liquidity Ratios
                            Systems
                            Models

                    3   Operational Risk                                           18 Hrs
                            Customers
                            Staff
                            Electronic/Technology
                            Process
                            Anti Money Laundering
                            Operational Ratios, etc.
                            Systems
                            Models

                    4   Credit Risk                                                42 Hrs
                            Credit Assessment
                            - Financial
                            - Non financial
                            Portfolio Management
                            - Securitization
                            - Use of Derivatives
                            Capital Adequacy Ratios
                            Systems
                            Models

                    1   Islamic Banking                                            24 Hrs
             C      2   Miscellaneous Risks

                    1   Supervision and Regulations of Risk                        18 Hrs
                    2   Enterprise Wide Risk Management
             D
                    3   Good Governance and Transparency
                    4   International Best Practice
                                         (Detailed outline follows)
Page # 5                                                              Risk Management Certificate(RMC)
                                                                                                   IBS
                         Risk Management Certificate

A)     Introduction to Risk Management


       OBJECTIVE:
       To understand the nature of risks, its sources and how it affects banks/organizations.


       CONTENTS
       1. Introduction to Risk Management
               Definition of risk
               Types of risk
               Development of risk management
               Risk management framework
               Lessons learnt                                              6 hrs


       2. Basel Directives I


            Basel Directives II
                Standardized
                Advanced


            Regulatory Capital Requirements
                Regulatory capital under Basel I
                Regulatory capital under Basel II
                Standardised approach
                Foundation Internal Ratings Based Approach
                Advanced Internal Ratings Based Approach
                Basel II Risk Weight Functions




 Page # 6                                                            Risk Management Certificate(RMC)
                                                                                                  IBS
           Basel Trading Book Issues
           -   Counterparty credit exposure
           -   Double default effects
           -   Short term maturity adjustment
           -   Unsettled trades
           Wrong way risk
           Central Bank of Kuwait Rules and Regulations, Policies   6 hrs


      DURATION :                                                    12 Hours




Page # 7                                                      Risk Management Certificate(RMC)
                                                                                           IBS
B 1. Market Risk

       OBJECTIVES:


        •   To familiarize participants with concepts, techniques and principles of risk management in
            specific areas.
        •   To develop risk thinking and apply knowledge to practical changes within the
            banks/organizations.
        •   To learn about the different risks involved while managing transactions
        •   To provide the management with risk related information vital for decision making


       CONTENTS:


       Current Market Conditions and the Credit Crunch
            Impact on liquidity in different Capital Markets
            Marking to a Market (MTM), pricing and valuation issues


       Pricing, Valuation and Mark to Market
            Pricing for market sensitive instruments
            Levels I, II and III
            Independent pricing sources
            Marking to Model
            Accounting issues in pricing and valuation
            -   Determining fair value
            -   Market value versus historical cost


       Market Risk Management in the Wider Bank
            Simple market risk controls
            -   P/L, limits
            -   What do you own? The deal review process
            Culture and organisation
            -   Risk management in the broader bank
            -   Banks vs other financial institutions vs corporates



 Page # 8                                                             Risk Management Certificate(RMC)
                                                                                                   IBS
      Quantitative Risk Management Tools
           Risk management tools
           -   Duration and Convexity
           -   Market returns
           -   Models of return processes
           -   Positions and sensitivities (equity delta / interest rate delta)
           -   Concepts of arbitrage


      Portfolio Risk Aggregation
           Portfolios and risk aggregation
           -   Types of portfolios
           -   Diversification and correlation
           -   Volatility and standard deviation
           -   Aggregation: introducing composite risk measures
           -   Value-at-risk


      The use of VAR
           Variance – covariance
           Specific risk
           Illiquid assets
           Volatility and correlation instabilities


      Managing Market Risk: More Tools
           New products and managing product complexity
           Systems and effective risk reporting


      Derivatives experience(s)
           Implied volatility
           What does implied volatility teach us about return distributions?
           Fat tails and market risk measurement


      Dealing with Derivatives
           The return distribution for nonlinear instruments
           Understanding confidence intervals for non-linear portfolios
           The importance of Greeks for market risk management

Page # 9                                                                 Risk Management Certificate(RMC)
                                                                                                      IBS
       Market Risk for Asset Managers
            Alpha, beta, gamma, etc.
            Risk vs a benchmark
            Asymmetric beta
            Alternative beta


       Backtesting
            P/L explanation
            The back testing process
            Exemptions: how many do we expect and how many are we allowed?
            Clustered exceptions and autocorrelation
            Extreme value theory
            Setting limits, excessions of limits and Model Validation


       Securitization and Structured Finance
            Liquefying balance sheets
            Pooled asset risks
            Legal structures
            Valuation
            -   Cash flow projections
            -   Optionality/Prepayments
            -   Liquidity issues


       Capital for Market Risk
            The 1996 Market Risk Amendment to Basel I
            Best practice in market risk economic capital calculations
            Disclosure from leading institutions
            The future of market risk capital


DURATION: 18 Hours




Page # 10                                                               Risk Management Certificate(RMC)
                                                                                                     IBS
B 2. Liquidity Risk


       OBJECTIVES:


        •   To familiarize participants with concepts, techniques and principles of risk management in
            specific areas.
        •   To develop risk thinking and apply knowledge to practical changes within the
            banks/organizations.
        •   To learn about the different risks involved while managing transactions
        •   To provide the management with risk related information vital for decision making


       CONTENTS:
            Understanding the Nature of Liquidity Risk
            -   The universe of investable instruments
            -   Pools of liquidity and benchmark securities, off the run and illiquids
            -   Normal market sizes, bid-offer, block trades
            -   Sale of assests/scuritization/factoring
            -   Repo and the funding of illiquid instruments
            -   Liquidation and "fire-sales"
            -   Liquidity risk in banking, securities trading and insurance


            Securities Pricing in the Presence of illiquidity
            -   Random walks and the assumption of continuous trading
            -   Gap risk
            -   The effect of jumps on the pricing framework
            -   Risk premiums and risk neutrality
            -   Impact on derivatives pricing and mark to market


            Building a Framework for Liquidity Management
            -   Mismatch approach
            -   Foreign currency liquidity management
            -   Cash management
            -   Double default and the analysis of collateralised transactions
            -   Basel and liquidity risk
Page # 11                                                            Risk Management Certificate(RMC)
                                                                                                  IBS
       Contingent Liquidity Risk
        -   The need for contingency planning
        -   Written contingency plans
        -   Roles and responsibilities
        -   Crisis management plans for assets and liabilities
        -   Internal and external communications
        -   Other crisis management issues


       Liquidity Risk in the Treasury Framework
        -   Metrics and measures of liquidity risk
        -   Liquidity gap analysis and the bank's liquidity profile
        -   Expected and unexpected loss analysis in the presence of illiquidity
        -   Liquidity management policy
        -   Regulatory requirements for liquidity management
        -   The use of conduits


       Measuring Market Risk: Liquidity-adjusted Value-at-Risk
        -   Definitions
        -   Using liquidity-adjusted VAR to manage risk
        -   Limitations of standard VAR measures to assess liquidity


       Systemic Change in Liquidity and Volatility
        -   Risk capital and illiquidity
        -   The effect of VAR models on liquidity cycles
        -   Liquidity and volatility
        -   The perspective from implied volatility
        -   Implied probability distribution and tail risk


DURATION: 18 Hours




Page # 12                                                             Risk Management Certificate(RMC)
                                                                                                   IBS
B 3. Operational Risk


       OBJECTIVES:


        •   To familiarize participants with concepts, techniques and principles of risk management in
            specific areas.
        •   To develop risk thinking and apply knowledge to practical changes within the
            banks/organizations.
        •   To learn about the different risks involved while managing transactions
        •   To provide the management with risk related information vital for decision making


       CONTENTS:


       What is Operational Risk?


       Factors influencing the Importance of Operational Risk


       Identifying and Classifying Operational Risk Categories
            Fraud
            Systems and operations
            Communication
            Documentation


       Analyzing Specific Risk


       Electronic/Technology
            Systems failure
            Programming errors
            Telecoms




Page # 13                                                           Risk Management Certificate(RMC)
                                                                                                 IBS
       People
            Customers
            Staff
            -    Incompetence
            -    Fraud


       Process
            Execution error
            Booking error
            Transaction and mis-matching of trades
            Objectives of operational risk management
            Responsibilities
            -    developing a risk awareness culture
            -    developing operational risk management procedures
            -    Operational risk management techniques
            -    self assessment
            -    benchmarking
            -    allocating operational risk costs
            Anti Money Laundering


            Measuring Operational Risk
            -    Industry best practice metrics
            -    Data analysis – statistical methodologies to sample transactions
            -    Capital allocation requirements under Basel II


            Understanding the Risk Impact
            -    What is measured and how
            -    What not to measure
            -    The interpretation of information
            -    Capital allocation assumptions
            -    Capital adjustment policies




Page # 14                                                            Risk Management Certificate(RMC)
                                                                                                  IBS
  Stage 1 : Understanding how the Operational Risk environment might look
       Systems map and assessment

  Stage 2: Understanding the Operational Risk environment
       Matching of people
       Matching of systems
       Assessing how the support function will work


  Stage 3 : Living with the Operational risk environment
       Getting systems to communicate and work in tandem
       Living with multiple back-office and front-office systems
       Living with multiple processes
       Politics
       Dealing with resentment, dismissals/ redundancies


  Stage 4: Designing and building a better operational risk environment
       Longer-term - integration and rationalisation
       Process re-engineering and streamlining processes
       Removing duplication
       Straight Through Possessing projects
       Systems design and end-user considerations
       Single back office and front office
       Overcoming resistance and introducing training strategies
       Project planning, budgeting and communications
       Assigning responsibility for risk policy


   Analysing a situation
       Identifying potential risks
       Identifying killer risks
       Identifying the cause of the risk situations
       Devising the recovery plan




Page # 15                                                          Risk Management Certificate(RMC)
                                                                                                IBS
Managing and Implementing the Operational Risk Management Policy


   Generic Approaches
        Do nothing
        Insurance
        Risk profiles mapping
        MIS
        Straight Through Processing (STP)
        Processes and controls
        Overcoming data incompatibility
        Systems reconciliation


   Soft Issues
        Building risk awareness culture
        Building consensus on risk allocation policies
        Building sense of responsibility for risk reduction
        Overcoming resistance to change and establishing clear, straight-through communication
        channels
        Corporate governance


    Identifying and Tackling Line Management Issues
        Assessing the level of senior management buy-in to operational risk solutions
        Understanding reporting lines and roles/ responsibilities
        Implementing effective management control
        Empowerment and staff control


   DURATION : 18 Hours




 Page # 16                                                          Risk Management Certificate(RMC)
                                                                                                 IBS
B. 4     CREDIT RISK


        OBJECTIVES:


         •   To familiarize participants with concepts, techniques and principles of risk management in
             specific areas.
         •   To develop risk thinking and apply knowledge to practical changes within the
             banks/organizations.
         •   To learn about the different risks involved while managing transactions
         •   To provide the management with risk related information vital for decision making




        CONTENTS


         A) Credit Risk Assessment
                Financial
                -   Financial Analysis
                -   Cash Flow Analysis
                Non Financial
                -   The Business
                -   The stakeholders
                -   The competition                                                         12 hrs


         B) Portfolio Management
                Simple models of corporate structure and default processes
                Credit risk as default probability, recovery rates and exposure
                Ratings agents approach to credit risk Portfolio Credit Risk
                Probability of default, loss given default and correlation of default
                Credit risk of portfolios compared with single positions
                Loss distributions and relationship to expected loss, worst credit loss, economic and
                regulatory capital
                Introduction to portfolio credit risk models
                Optimising portfolios for best risk / return



 Page # 17                                                              Risk Management Certificate(RMC)
                                                                                                     IBS
            Overview of Basic Statistics
                  Elementary statistics
              -       Volatility of market factors
              -       Covariance and correlation, correlation matrix
              -       Problems with real-world data


                  Managing Credit Risk: Securitisation and Risk Transformation
                  -    Concepts of regulatory capital for credit risk and return on assets
                  -    Techniques for moving risk off balance sheet
                      •   securitisation and synthetic securitisation
                      •   CDOs and other tranche products


                  Pros and cons of securitisation for origination firms and investors


                  Managing Credit Risk: Credit Derivatives and Risk Transfer
                  -    What are credit derivatives and why are they used?
                  -    Single name credit derivatives (unfunded and funded structures)
                      •   credit default swap
                      •   total return swap
                      •   first-to-default basket note
                  -    Pricing and risk of single obligor credit derivatives
                  -    Regulatory capital impacts of credit derivatives
                  -    Documentation and legal issues


                  Modelling Credit Exposure of Derivatives
                  -    Loans and derivatives
                  -    Transaction based models
                  -    Foreign exchange transactions
                  -    Interest rate swap transactions
                  -    CEF calculations
                  -    Effect of CMTM
                  -    Market factor based models
                  -    Counterparty exposure simulation models
                  -    Handling credit exposure limits

Page # 18                                                                 Risk Management Certificate(RMC)
                                                                                                       IBS
            -   Integration of netting
            -   Integration of margin / collateral


            Evaluating the Credit Risk of Derivatives
            -   Expected and unexpected credit loss
            -   Default only versus economic loss
            -   Credit loss profile
            -   Simulation approach to economic capital
            -   Risk rating model
            -   Rating migration matrix
            -   Loss given default


            Recent History
            -   "Bad Bank' experiences
            -   Troubled Asset Relief Program (TARP)                        30 hrs


DURATION: 42 Hours




Page # 19                                                 Risk Management Certificate(RMC)
                                                                                       IBS
C)      ISLAMIC BANKING


       OBJECTIVE


       To gain a practical understanding of the Risks and Controls inherent within Islamic Banking


       To know how to handle Islamic Products and risks associated with such products


       CONTENTS


              1. Islamic Banking
                •       Introduction to Islamic Banking Products
                •       Types of Risks
                •       Risk Management Frameworks
                •       How specific risks affect Islamic Banking Instruments such as
                    -    Musharaka
                    -    Mudaraba
                    -    Ijara
                    -    Sukuk
                    -    Takaful
                    -    Salam                                                      18 hrs


              2. Miscellaneous Risk
                        Legal
                        Reputational
                        Environmental
                        Systematic                                                  6 hrs




       DURATION : 24 Hours




Page # 20                                                              Risk Management Certificate(RMC)
                                                                                                    IBS
D)     SUPERVISION AND REGULATION:


       To comply with rules and regulations, local and international, applicable to risks management
       and assist all divisions bank-wide to manage risks within their area


       CONTENTS:


            Supervision and Regulations of Risk


            -   Central Bank of Kuwait Rules and Regulations
            -   Stress Testing
                •   Incremental transactions
                •   Market discontinuity
                •   Scenario analysis
                •   General considerations
                •   Assumptions sensitivity


            Enterprise Wide Risk Management (EWRM)
            Good Governance and Transparency
            International Best Practices
            -   The role of the Risk Management Department
            -   The role of the Central Audit Department
            -   Working with external auditors
            -   Working with the Central Bank of Kuwait


       DURATION:18 Hours




Page # 21                                                            Risk Management Certificate(RMC)
                                                                                                  IBS
                        Risk Management Certificate

                                                     Dates/
        Part         Program Title     Hours
                                                     Exam
                                                     31 Jan,
                Introduction to Risk
                                         6        Exam(MCQs)
                Management
                                                   on 1 Feb pm
            A
                                                      2 Feb
                Basel Directives         6        Exam(MCQs)
                                                   on 3 Feb pm
                                                   Feb 13 – 15
                Market Risk             18
                                               Exam(MCQ) Feb 17
                                                    Mar 6 - 8
                Liquidity Risk          18
                                               Exam (MCQ) Mar 10
            B
                                                   Mar 13 - 15
                Operational Risk        18
                                               Exam (MCQ) Mar 17
                                                  Mar 27 – Apr 1
                Credit Risk             42
                                                Exam(Cases) Apr 7
                                                    Apr 10-13
            C   Islamic Banking         24
                                               Exam (MCQ) Apr 14
                Supervision and                     Apr 24-26
            D                           18
                Regulations                    Exam(MCQ) Apr 28

        Total                           150




Page # 22                                           Risk Management Certificate(RMC)
                                                                                 IBS
                                        Administration
T a r g e t A u d ie n c e
Eligibility for Admission

     Education                      :   Graduates
     Working Experience             :   Bank Employees with experience less than 1 year in Audit and
                                        Risk areas.
     English Language               :   Fluency both written and oral communication
     Bank’s Recommendation          :   The bank should recommend the candidate for the Certificate in
                                        Risk Management Program


D u r a tio n
The program will be conducted at the Institute of Banking Studies. Modules will be held from 8:00am – 3:00pm,
Sunday through Thursday, but there may be evening Modules from 5:00pm – 8:30pm when necessary, or
Saturday sessions at times to be announced.

Exam s
Each Module will be subject to Examination. Pass mark 70% averaged across topic areas.

P r o g r e ss – M o d u le s
Progress to each new level is dependent upon Exam success and meeting all other criteria.
      In certain areas performance will be assessed by reviewing Exam results over more than one Element
      within the four (4) Modules A, B, C, D.

A tte n d a n c e
Attendance at every session is a pre-requisite of Certificate issue.

P u n c tu a lity
Timeliness is essential
   3 late arrivals in the Training Room, will be recorded as absent for one day.
   3 days absent during the entire Program and at the discretion of the IBS – the participant will be required
   to leave the Program.


R e p o r ts
Punctuality, participation, quality of input, initiative, teamwork, etc. will where appropriate, be reported upon.




 Page # 23                                                                   Risk Management Certificate(RMC)
                                                                                                          IBS
Language
All Modules will be conducted in English

P r o g r a m B o o k le t
A detailed Program Booklet incorporating all Program Outlines, Administration details etc will be provided to all
the Participants at commencement of the Program.

G en eral
Final decision making in all matters relating to this Program will remain with the Institute of Banking Studies.




 Page # 24                                                                  Risk Management Certificate(RMC)
                                                                                                         IBS