Post on 23-May-2020
The Banking and Corporate Finance Training Specialist
Enterprise Risk Management
(ERM)
A 3-Day Training Course for Bankers & Non Bankers
This course can also be presented in-house for your company
or via live on-line webinar
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+44 (0)20 7387 4484
Course Overview
Participants will: Be introduced to ERM, emergence, scope and purpose. Get an overview of the challenges to implementing and establishing an ERM
programme Have explained to them the cultural challenges, including getting the right sponsor,
encouraging collaboration and understanding multiple risk types. Gain an understanding of the components of the ERM
Be appraised of exception based escalation Be taught about how to establish ERM Systems. Have an overview on portfolio risk management & ERM systems
Understand risk management under ERM Be taught about optimising risk and equity allocation
Get to grips with new challenges and regulatory considerations
Session 1: ERM; Emergence, scope & purpose Traditional Silo risk management How does ERM differ
Definition of risk - types Consequences of failing to manage risk
Internal and external drivers of risk to organisations The role of the risk management function The purpose and key benefits of risk management
Corporate Governance and risk management Case Study –Creating a new ERM
Discussion – What do you think of your existing ERM process
Session 2: Challenges to implementing and establishing an ERM programme Defining risk, measurement , getting reliable data, confidence level and time frame
Chosen measurement approaches, tracking error, duration etc Aggregation, distinguishing firm risks from client risks
Timescale challenges, amalgamating integrated VaR models Risk variance and co-variance Hidden correlations
Complexity, collecting and transforming inputs from disparate sources Adding narrative to data so key points can be understood/identified
Case Study - Hidden correlations Exercise - Prepare a brief board paper setting out parameters followed by debrief and discussion
Session 3: Cultural challenges Getting the right sponsor Gaining acceptance throughout the firm
Establishing a common risk language Overcoming traditional silo mentality/practices
Encouraging collaboration Embedding the approach
Combining credit and market and operational risk teams Different skill types, cultures and different roles Understanding multiple risk types
Course Content
Course Objectives
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Role Play – Dealing with objections from a senior colleague, followed by debrief and discussion
Session 4: ERM – the components
Definition of equity The three types of equity; regulatory, economic and actual
VaR explained Procyclicality Assessing the risk maturity of the business
Setting parameters Establishing report lines and responsibilities
Convincing decision makers that the exercise is more than box ticking Case study –Calculating the three types of equity
Exercise – Consider your department. Are all risk components covered? What
improvements would you suggest and what would you leave out. Followed by debrief and discussion.
Session 5: Risk Appetite
The key principles Appetite, tolerance and capacity – what do these thresholds mean?
A sample RAS Defining RAS and risk limits Using RAS as a management tool
Case study – Consider a simple RAS Exercise –What RAS does your firm require? Followed by discussion and debrief
Session 6: Establishing ERM systems
The key principles Suggested framework, content and layout
Prudence and conservatism Period to be covered
Proportionality... how many risks? The ERM process from preparation to Board approval Challenge and independent review
Committees and their roles
Session 7: Portfolio Risk Management & ERM systems Portfolio performance measures
Value at risk Stress testing & impacts of stress tests
Scenario modelling and its impacts RAROC Embedding ERM in the firm
Gaining acceptance Case study – A sample stress test on the ERM
Session 8: Risk Management under ERM Underwriting process
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CRA and CRR
Transfer pricing Active risk provisioning Risk hedging strategies
Risk allocation
Case study – A simple risk allocation process
Session 9: Exception based escalation Periodic reporting of risk and control information
Immediate escalation of risks as they arise Immediate escalation of controls as they fail
Prioritising Setting thresholds and limits Aggregated escalation matrix
Case study – What are the exceptions you need for your department. Are they
specific to you or the firm? Role play – Dealing with a fictional exception in your department. Followed by discussion and debrief.
Session 10: Optimising Risk and Equity Allocation Risk portfolio theory
Active risk portfolio management Stakeholder perspectives – internal and external Inter-relationships
Collaboration Forming an overall picture
Multi task forums Case study – Looking from the shareholders viewpoint
Session 11: Accountability Risk control owners
Departmental responsibility Transparent reporting Visibility
Fairness Sanctions
Case study - What report lines would you recommend for your department. How will exceptions be handled? Followed by debrief and discussion
Role Play – Persuade a colleague who objects, to taking on this role. Followed by debrief and discussion
Session 12: New Challenges
Regulatory changes Governance and strategic risks
Refreshing the profile Reputational risks
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Systemic risks
Case study– What must be done to ensure the new ERM reacts to real challenges and not just small changes? Followed by debrief and discussion
Session 13: Regulatory Considerations Regulatory issues
Auditors requirements Other Regulatory requirements
Exercise – who regulates you? What does each want from an ERM? Will we deliver this? Are we meeting these expectations with our ERM? What changes if
any might be made?
Session 14: Course Summary
Final Exercise in role play form (as many as time permits) – convince the course director, playing a difficult CEO to implement your ERM. Followed by debrief and discussion.
END
Your course director has spent more than 40 years in the banking and financial sector, much of it in a senior managerial/Director role. He is a former Institute of Banking
Lecturer, having gained distinctions in the exams. He is a subject matter expert on all aspects of retail, corporate and global banking, including risk management and regulatory compliance. He has lectured extensively to both leading global financial institutions and to
smaller bespoke specialists. He has delivered extensive programmes in all parts of the world including the USA, Europe, MENA, Africa and Hong Kong. He is currently an
accredited Master Trainer at the world’s biggest global bank.
In very simple terms, ERM empowers the Chief Risk Officer (often the Group MD or CEO) to measure, monitor and oversee all the risks the firm is taking in the form of a single, user friendly report that can be accessed from within a central “command bunker” in real-time.
Its purpose it to provide a meaningful risk oversight tool which avoids the pitfalls of traditional “silo” working and “silo” risk taking. “Silo” working involves business units
operating independently of each other and not always in the best interests of the firm as a whole.
Put bluntly, no CEO can attest properly that risk is managed effectively across the firm unless it can be measured, assessed and overseen in a single report that is available on a
real time basis at the click of a button. Anything less involves guesswork. Within any organisation there are both tactical and strategic risk takers. The strategic risk
takers – CEO, directors and senior managers – formulate the business strategy and agree
Course Summary
Background of the trainer
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that certain risks can and must be taken, whereas others are to be expressly avoided.
This strategy is communicated throughout the organisation using a risk appetite statement (RAS) which is often called an Operating Plan.
The RAS sets the “tone” of the business by setting out in clear terms how much risk the organisation is willing to accept in pursuit of its profit objectives. It also should be
equally clear about risks that are unacceptable or should only be accepted in exceptional circumstances. Deployed well, the RAS becomes the blue-print or guide for the tactical risk takers to implement. Typically tactical risk takers comprise middle management,
operational managers, client facing and risk support staff. It is these members of the firm that will be charged with making the initial risk assessment/decisions.
In an ideal world, acceptable risks are exploited, marginal risks are considered carefully and unacceptable risks are declined. Too much approval and losses will be made, too little
and profitability will suffer. To enable top management to oversee the process of risk acceptance and above all to confirm it is working well, a robust system of checks and
balances needs to be set in place. The firm needs to identify all the risks it is taking, to decide which to accept and reject and to apply an effective method of capturing, managing and monitoring risk across the whole firm. This is the role of ERM.
The concept of ERM is not new but became a priority following the 2008 financial crisis
which revealed in very harsh terms that many organisations did not actually have a full appreciation of all the risks being taken across the firm. Instead risks were simply lumped together based on reports from individual business units. ERM requires an integrated risk
management process that clearly measures all risks at all levels in all operating units and combines them into a single risk monitoring tool.
This highly interactive and workshop style course will enable delegates to discuss strategic ERM frameworks, understand the key processes for implementing an effective ERM function and how to put in place the appropriate ERM architecture. It will deal with set up,
implementation, operation, management and exceptional issues and will demonstrate how this important corporate governance tool can be used to manage the risk profile across
the firm. It will cover economic capital allocation, risk appetite, risk allocation, and risk budgeting and risk reporting.
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Redcliffe has provided in-house training for the following companies:
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Tailored Learning
All of our training courses can be tailored to suit your company’s exact training needs.
We will work closely with you to help develop a training programme with content that is unique for your organisation.
Please email us on enquiries@redcliffetraining.co.uk for more information
E-Learning
This course can also be presented as a bespoke e-learning programme created by you to fit your exact requirements.