INSTITUTE OF BANKING STUDIES - KIBS Methods, Market and Liquidity Risk Management OBJECTIVE To familiarize participants with concepts, techniques and principles of risk management

INSTITUTE OF BANKING STUDIES

Website: www.kibs.edu.kw email: [email protected]

Ibselearning: wwwibselearning.com email: [email protected]

Accredited by:

http://www.kibs.edu.kw/

mailto:[email protected]

2 Risk Management Certificate (RMC)

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Risk Management

is a Process of Taking

Calculated Risks

not Avoiding Risks

"Carl Olsson, Global Risk Management, SCB"


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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


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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


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PROGRAM SCHEDULE

Module

Parts

Dates

No. of

Hrs

Exam Dates/Time

I Introduction to Risk

Management

14 - 15 January 2018

8:00 am - 3:00 pm

Sunday - Wednesday

12 hrs 22 January 2018

2:00 - 3:00 pm

II

Part 1- Quantitative

Methods, Market and

Liquidity Risk

Management

4 - 12 February 2018

5:00 - 8:30 pm

Sunday - Wednesday

& Sunday - Monday

18 hrs 19 February 2018

2:00 - 3:30 pm

Part 2- Stress Test -

ICAAP and Assets

Liabilities Risk

Management

4 - 12 March 2018

5:00 - 8:30 pm

Sunday - Wednesday

& Sunday - Monday

18 hrs 19 March 2018

2:00 - 3:30 pm

Part 3-Operational Risk

25 March - 2 April, 2018

5:00 - 8:30 pm

Sunday - Wednesday

& Sunday - Monday

18 hrs 12 April 2018

2:00 - 3:30 pm

Part 4-Credit Risk

8 - 12 April 2018

8:00 am - 3:00 pm

Sunday - Thursday

30 hrs 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


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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

6 hrs

Basel Directives I

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

6 hrs

DURATION


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12 Hours


M II - Part 1

Quantitative Methods, Market and Liquidity Risk Management

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

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


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- 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

- 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

DURATION

18 Hours


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M II - Part 2

Stress Test - ICAAP and Assets Liabilities Risk Management

OBJECTIVE


specific areas.



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


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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


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M II - Part 3 - Operational Risk

OBJECTIVE


specific areas


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


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- 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


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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 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


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M II - Part 4- Credit Risk

OBJECTIVE


specific areas.



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


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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

- "Bad Bank' experiences

- Troubled Asset Relief Program (TARP)

DURATION

30 Hours


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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


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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

- 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


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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


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Administration Target Audience

Eligibility for Admission Education : Graduates

Working Experience : Bank Employees with less than 1 year experience in Audit and

Risk areas

English Language : 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 [email protected] http://www.kibs.edu.kw PO Box 1080 Safat, 13011 Kuwait

mailto:[email protected]

Documents

INSTITUTE OF BANKING STUDIES - KIBS Methods, Market and Liquidity Risk Management OBJECTIVE To familiarize participants with concepts, techniques and principles of risk management