Integrated Risk & Corporate Governance

Overview

Across the globe regulators are increasingly linking the amount of risk taken by a bank to the amount of capital it is required to hold and banks and financial services are increasingly being managed on risk-based management practices. The banks, their products, the regulations and the global market are becoming increasingly complex, driving ever greater challenges in effective risk management. A key lesson of the banking crisis of the last five years is that risks are highly integrated and to manage them efficiently banks have to understand these interactions.

Key features include:

• the explanation of the current risk-based regulations
• detailed review of the major risks faced by banks
• industry best practices for adopting an enterprise approach to integrating risk management across an entire organisation
• using governance techniques to build a group wide culture to ensure everyone takes an active role in managing risks in line with the banks strategic objectives
• what challenges could be faced by risk managers in the future.

The course will make extensive use of case studies designed to explore, examine and reinforce the concepts and ideas covered over the five days. Historical events at banks will be used throughout the course to highlight how they have failed to manage their risks and actions that could have been taken to prevent loss.

Objectives

The objective of this course is to help bank management deliver an appropriate integrated strategy for managing the complex and changing risks and regulations in today’s international banking environment. Specifically this course aims to give senior level management an understanding of:

• major risk within the financial industry and the major international risk regulations
• how to manage a bank’s assets and liabilities whilst maximising return
• the interaction between risk types and how banks use an integrated approach for their management
• corporate governance and the best practice approaches to managing the diverse interests of the stakeholders
• how to develop a culture of risk governance as a tool for minimising unnecessary risk taking

Who should attend this seminar

This course is intended those who are new to integrated risk management, senior management responsible strategic risk management, or those who wish to further their understanding of enterprise risk management. It will be of use to:

• Board level bank management
• Senior managers
• Senior risk managers and analysts
• Senior directors and risk managers responsible for strategic risk management
• Internal auditors
• Regulatory and compliance personnel
• Treasury professionals
• Asset and liability managers and analysts
• Regulators and supervisory professionals
• Suppliers and consultants to banks and the risk management industry
• Corporate governance and risk governance managers.

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