INSTITUTE OF BANKING STUDIES Accredited by: Website: www.kibs.edu.kw Ibselearning: wwwibselearning.com email: training@kibs.edu.kw email: ibslearn@kibs.edu.kw
Risk Management is a Process of Taking Calculated Risks not Avoiding Risks "Carl Olsson, Global Risk Management, SCB" 2 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) G8-2018 Index: Title Page # Program Objectives 4 Program Schedule 5 Outlines Module I- Introduction to Risk Management 6 Module II Part 1 - Quantitative Methods, Market and Liquidity Risk Management 7-8 Module II Part 2 - Stress Test - ICAAP and Assets Liabilities Risk Management 9-10 Module II Part 3 - Operational Risk 11-13 Module II Part 4 - Credit Risk 14-15 Module III - Islamic Banking Risk 16 Module IV - Supervision and Regulation Risk 17 e-learning Courses 18 Administration 19 3 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) Program Objectives 1 To understand the nature of risk, 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 gain a practical understanding of the Risks and Controls inherent within Islamic Banking and Islamic products 7 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 4 Risk Management Certificate (RMC)
PROGRAM SCHEDULE Module Parts Dates No. of Hrs I Introduction to Risk Management 14-15 January 2018 8:00 am - 3:00 pm Sunday - Wednesday 12 hrs Exam Dates/Time 22 January 2018 2:00-3:00 pm II Part 1- Quantitative Methods, Market and Liquidity Risk Management Part 2- Stress Test - ICAAP and Assets Liabilities Risk Management Part 3-Operational Risk Part 4-Credit Risk 4-12 February 2018 5:00-8:30 pm Sunday - Wednesday & Sunday - Monday 4-12 March 2018 5:00-8:30 pm Sunday - Wednesday & Sunday - Monday 25 March - 2 April, 2018 5:00-8:30 pm Sunday - Wednesday & Sunday - Monday 8-12 April 2018 8:00 am - 3:00 pm Sunday - Thursday 18 hrs 18 hrs 18 hrs 30 hrs 19 February 2018 2:00-3:30 pm 19 March 2018 2:00-3:30 pm 12 April 2018 2:00-3:30 pm 23 April 2018 2:00-4:30 pm III Islamic Banking Risk 29 April - 2 May, 2018 8:00 am - 3:00 pm Sunday - Wednesday 24 hrs 8 May 2018 2:00-4:00 pm IV Supervision and Regulations Risk 6-8 May 2018 8:00 am - 3:00 pm Sunday - Tuesday 18 hrs 14 May 2018 2:00-3:30 pm Total 138 hrs 5 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) M I - Introduction to Risk Management OBJECTIVE To understand the nature of risks, its sources and how it affects banks/organizations. CONTENTS Introduction to Risk Management Definition of risk Types of risk Development of risk management Risk management framework Lessons learnt Basel Directives I 6 hrs Basel Directives II Standardized Advanced Basel III Proposal Regulatory Capital Requirements Regulatory capital under Basel I Regulatory capital under Basel II Regulatory capital under Basel III Proposal Standardised approach Foundation Internal Ratings Based Approach Advanced Internal Ratings Based Approach Basel II Risk Weight Functions 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 DURATION 6 hrs 6 Risk Management Certificate (RMC)
12 Hours Risk Management Certificate (RMC) OBJECTIVE M II - Part 1 Quantitative Methods, Market and Liquidity Risk Management 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 Bank Financial Statements from Risk Management Prospective Overview of Financial Crisis, Lessons learned and impact on Kuwait Overview of Risk Management Structure and CBK Roles Overview Risk Classification Approaches Most applied Quantitative Methods for Risk Management - Performance Evaluation - Returns Attribution and Measuring - Detecting Overestimating IRR - Data Gathering and Sample Selection - Measuring and Modeling Assets prices Volatilities - Selecting Volatility Measures - Common Return Distributions in Risk Modeling - Confidence level and Fat Tail detecting for Hidden Risk - Frequency Distribution for Modeling Probabilities - Risk Adjusted Return Measures - Measuring Portfolio Risk and Returns - Modeling Beta, Covariance and Correlation - Quantifying Concentration - Modified Duration and PV01 - Excel Applications Value at Risk Approaches - Historical Simulation Methods 7 Risk Management Certificate (RMC)
- Analytical VAR - Monte Carlo VAR Foreign Currency Risk - Relevant Economic Factors - Value At Risk - Mitigation Techniques Interest Rate Risk Management - Relevant Economic Factors - Measuring and Modeling - Value At Risk for Fixed Income Instruments - Mitigation Techniques Investment Risk Management DURATION 18 Hours - Investment classification (Equity, RE, FI, Funds, Private Equity and VC) - Relevant Risk factor per Class - Pricing Risks - Investment Performance and Economic Cycle - Measuring and Modeling Risk Adjusted Return - Value At Risk for Listed and Unlisted Equity Investment - Assets Allocation and Capital Market Expectations 8 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) OBJECTIVE M II - Part 2 Stress Test - ICAAP and Assets Liabilities Risk Management 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 Review of Basel 2 and Basel 3 Financial derivative in Risk Management - Futures and Forward contracts on FX, Equity and Commodities - Options Strategies - Swap Pricing Liquidity Risk Management - Market Liquidity Risk - Funding Liquidity Risk - Liquidity Coverage Ratio (LCR) - Net Stable Funding Ratio (NFSR) - Measuring Liquidity Risk: LAR, SAR, Skewness and Kurtosis - Risk Mitigation Techniques Balance sheet Risk Management (ALM) - Maturity mismatching and liquidity gaps - Assets and liability risk mismatching - Economic factors and balance sheet growth Introduction to ICAAP - Concentration risk Capital Charge - Investment capital charge Introduction to Credit Risk Portfolio Modeling (for the purpose of understanding ICAAP, Stress test & ALM) - Understanding Probability Of Default (PD) - Understanding Credit Risk Pricing 9 Risk Management Certificate (RMC)
Stress testing - Scenario analysis - Sensitivity analysis - Factor push analysis - Analysis of stress testing results - Stress test Excel modeling Risk Appetite and Risk Tolerance for Bank Risk Budgeting - Determining the main objectives of risk budgeting - Factors of risk appetite - Factors of risk tolerance - Rational decision taking Country Risk Analysis DURATION 18 Hours 10 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) M II - Part 3 - Operational Risk OBJECTIVE 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 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 11 Risk Management Certificate (RMC)
- 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 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 12 Risk Management Certificate (RMC)
Analysing a situation Identifying potential risks Identifying killer risks Identifying the cause of the risk situations Devising the recovery plan 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 Chan 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 13 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) M II - Part 4- Credit Risk OBJECTIVE 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 Credit Risk Assessment Financial - Financial Analysis - Cash Flow Analysis Non Financial - The Business - The stakeholders - The competition 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 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 14 Risk Management Certificate (RMC)
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 Modeling 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 - Integration of netting - Integration of meeting 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 DURATION 30 Hours - "Bad Bank' experiences - Troubled Asset Relief Program (TARP) 15 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) M III - Islamic Banking Risk 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 Islamic Banking Risk 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 Miscellaneous Risk Legal Reputational Environmental Systematic 6 hrs DURATION 24 Hours 16 Risk Management Certificate (RMC)
Risk Management Certificate (RMC) M IV - Supervision and Regulations Risk OBJECTIVE 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 DURATION 18 Hours - 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 17 Risk Management Certificate (RMC)
List of e-learning Courses Title 1- Performing Risk Analysis 2- Risk Management: Identifying Risk 3- Risk Management: Assessing Risk 4- Risk Management: Dealing with Risk 18 Risk Management Certificate (RMC)
Target Audience Eligibility for Admission Education : Working Experience : English Language : Administration Graduates Bank Employees with less than 1 year experience in Audit and Risk areas Fluency both written and oral communication Bank s Recommendation : The bank should recommend the candidate for the in Risk Management Certificate Program Duration The program will be conducted at the Institute of Banking Studies as per the attached schedule. Exams Each Module will be subject to Examination. Pass mark 70% averaged across topic areas. Progress Modules 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. Attendance Attendance at every session is a pre-requisite of Certificate issue. Punctuality Timeliness is essential Attendance at every session of the in-class training courses is required. 3 late arrivals, or 3 absences in the training sessions in the Training Room, will be recorded as absent for one day. 2 days absent during the entire Program and at the discretion of the IBS, the participant will be required to leave the Program. Reports Punctuality, participation, quality of input, initiative, teamwork, etc. will where appropriate, be reported upon. Language All Modules will be conducted in English Program Booklet A detailed Program Booklet incorporating all Program Outlines, Administration details etc will be provided to all the Participants at commencement of the Program. General Final decision making in all matters relating to this Program will remain with the Institute of Banking Studies. FOR FURTHER INQUIRIES, PLEASE CONTACT: Ms. Nabila Gholoum Senior Officer - Operations 22901132 Fax 22901181 nabila@kibs.edu.kw http://www.kibs.edu.kw PO Box 1080 Safat, 13011 Kuwait 19 Risk Management Certificate (RMC)