The Mechanics of Risk Management
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A detailed online overview of all the different types of risk that have a significant impact on our global financial markets today. A robust understanding of risk management is essential for everyone in the financial markets: an understanding of the principles of risk management is no longer a “nice to have”, it is absolutely critical. This course has been structured to help both risk and non-risk professionals get to grips with the major concepts, themes and issues that underpin modern risk management. It’s a guide that debunks the concept that only an elite few can truly understand the dynamics of risk. It focuses on three key areas that permeate through all types of risk: Identification, Measurement and Management. It will provide you with a workable framework that will help you quickly understand the key issues within the different types of risk.
By studying this programme it will offer you the option of receiving a Postgraduate Certificate from the respected Middlesex University. This is the only course on this topic that offers you the chance to get this qualification.
The course takes place over 16 weeks and consists of eight distance learning units. Every two weeks an additional unit will be released with the associated assessment, so you can grasp your understanding before moving on to the next unit.
COURSE PROGRAMME CORE UNITS:
Unit 1 - Introduction to Risk Management
- Understand the contrast between risk & uncertainty
- Summarise the principal types of enterprise risk
- Examine the notion that risk management should become part of an organisation's culture
- Explain the methodological principles of Value at Risk (VaR) & evaluate whether it is a reliable indicator of portfolio risk
Unit 2 - Interest Rate and Currency Risk
- Explain the key drivers affecting portfolio risk from variations in interest rates & foreign exchange
- Examine the basic mathematics underlying risk of fixed income instruments from the perspective of banks, asset managers, borrowers & lenders
- Explain the concepts behind foreign exchange forward rates, covered interest parity, how to hedge risk of assets/liabilities denominated in foreign currencies
- Explain the key concepts behind managing interest rate risks with swaps
- Explain the key concepts of duration, convexity, interest rate hedging & portfolio immunisation
Unit 3 - Market Risk
- Explain the symbiotic relationship between financial risk & investment returns & account for its position as the cornerstone of finance theory
- Differentiate between systematic risk & idiosyncratic risk
- Outline the view of risk management which emanates from the Capital Asset Pricing Model (CAPM) & Modern Portfolio Theory (MPT) & consider the strengths & weakness of such theories especially in the wake of the 2007/9 financial crisis
- Explore the view that for relatively uncorrelated asset returns there can be considerable risk reduction achieved through portfolio construction techniques designed to achieve diversification from combining assets in a systematic fashion
- Explain the key characteristics of risk adjusted returns
Unit 4 - Liquidity Risk
- Contrast between the notion of liquidity used by accountants in assessing balance sheet liquidity & the very different notion relating to depth & quality of transaction facilitation in financial markets
- Contrast between normal market liquidity conditions enabling transactions to be conducted with minimal transaction costs, temporary bouts of illiquidity which impair ability to transact, & critical episodes of illiquidity in which markets “seize up”
- Explain the linkage between maturity transformation & financial intermediation & the necessary presence of reasonably liquid markets
- Explore as a case study the dysfunctional nature in late 2008 of money markets for inter-bank funding, repos, commercial paper & “normal” arbitrage operations
Unit 5 - Operational Risk
- Illustrate how enterprises have substantial risks – resulting in financial loss, reputational damage and legal risks
- Illustrate with actual examples how operational failures from financial institutions
- Examine the loss scenarios of operational failures on both financial and non-financial enterprises and what internal control procedures
Unit 6 - Credit and Counterparty Risk
- Examine the various facets of credit risk which hinge on losses sustained from failure of a counterparty to honour contractual obligations
- Distinguish the separate components of credit risk
- Understand the mechanics of credit default swaps
- Understand the concepts of credit rating & scoring, the role of the major Credit Ratings Agencies, methods used to determine credit ratings, implications of ratings downgrades, how useful are ratings for determining actual risk of default?
Unit 7 - Systemic and Sovereign Risk
- Examine the dilemma that linkages between financial intermediaries may, up to a point, contribute to systemic stability
- Outline the observations that kurtosis & skew of financial asset returns leads to left tail dependencies with heightened probability of joint defaults in a liquidity crisis
- Illustrate how systemic risk might can emerge from a common shock, leading to a simultaneous default of several financial institutions & informational contagion where adverse news about one financial institution’s solvency will spread to fears regarding many other institutions
Unit 8 - Regulation and Risk Management
- Examine how statutory regulation is a primary method by which safeguarding the public interest in risk management is implemented in modern economies & explore the notion that corporate risk management is a form of self-regulation
- Explain the motivations for regulations pertaining to risk control at the national & trans-national levels & examine the dichotomy that regulation by nation states must contend with national risks but the fact that many financial risks are transnational
- Examine the role of major global regulators, supervisory & (quasi) regulatory bodies
- Outline the key characteristics of major statutes underpinning regulations of financial & non-financial enterprises & review proposed measures & accords
- Examine the practice of regulatory arbitrage
HOW YOU WILL LEARN
Through distance learning you can enjoy the benefits of studying, whilst minimising disruption to your existing professional commitments. You can set the pace at which you learn; applying the knowledge, skills and expertise gained from the materials to your work straight away. There’s also the huge savings of cost and time by not having to travel to a training location.
There are two routes of study you can take: the university-validated route and the standard non-validated route. Approaching the topics in a modular format, the course will enable you to grasp the key concepts in a practical way and thus helping you build a firm platform on which to expand your knowledge.
You can study the units online, save them to your computer or print them out. You can also take advantage of the online forum to meet your fellow participants and share knowledge, ideas and information at any time.
At the end of each unit there is a practical assessment that will allow you to benchmark your growth in knowledge and understanding and will also show you what a tangible ROI distance learning provides. Each unit is complimented by a video from the course director, taking you through the components of the course with particular emphasis on complex areas.