risk management 4 aug
TRANSCRIPT
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Overview of risk management
presentation by Khandakar Joyef
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DefinitionRisk Management ProcessManaging Risk Accountability?Risk Management CycleBroad category of Risk faced by FIRisk category for BanksRisk Management CultureCredit Risk at Canadian BanksBusiness scopes in risk functions
Learning agenda:
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Business magazine:In the world of finance, risk management refers to the practice ofidentifying potential risks in advance, analyzing them and taking precautionary steps to reduce the risk.
Wikipedia:Identification, assessment, prioritization of risk followed bycoordinated and economical application of resources to minimize,monitor, control of probability/impact of unfortunate events tomaximize realization of opportunities.
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a. Identify & Analyze:Identify possible risks/threat/uncertainties and analyze impact on organizationb. Examine Risk Management Technique:Develop financial models, conduct scenario analysis, benchmark with peersc. Select Risk Management Technique:Select a technique ensuring compliance and business goalsd. Implement TechniqueCommunicate across organization, train staff, have control points ready e. Monitor Results:Monitor results to identify patterns, improvise existing standards, policies to avoid loss
Risk Management Process
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Managing risk
Identifies risk/opportunities not being considered Determine risk appetite levels Development of risk management tools/parameters Assists Management to take informed decisions Achieve desired results maximizing earnings Increases shareholder confidence
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Accountability: teams view
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Risk Management Cycle
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Broad category of risk faced by FI
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Risk category for Banks
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Risk Management Culture
Establish language system to discuss & categorize risk Big Picture view of risk exposure Centralize ownership of process and decentralize decision
making Drive the process from Top and define roles Quantifying risk exposure and cost/benefits of managing risks Embed IT systems to facilitate Risk Management process Embed Risk Management Culture
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Risk Management Culture…contd
Establish language system to discuss & categorize risk:- Translate risk acronym in easy language for target audience
Big Picture view of risk exposure:- Value at risk, Cash flow at risk, Stress testing
Centralize ownership of process and decentralize decision making:- Front line officers to use tools and process to lead team and guide clients
Drive the process from Top and define roles: - Everyone of us is responsible, not only Risk Management department
Quantifying risk exposure and cost/benefits of managing risks:- Consistent and rigorous assessment of risk and quantification of benefits
Embed IT systems to facilitate Risk Management process:- IT system to developed as per user needs
Embed Risk Management Culture:- Top Management will espouse culture of responsible risk management through behaviours, systems, program put into place
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Credit Risk at Canadian Banks: 2017
Loan book exposure to energy producersUnsecured (credit card) lending, unsecured
lines of credit to consumer
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Business scopes in Risk functsion: offered by consulting firms
1. Operational risk:Process reviewsProcess improvementCompliance risk
2. Governance:Corporate governanceBusiness/strategic riskRisk framework implementationTraining & learning tools
3. Basel III advisory:Market riskOperational riskCredit risk
4. Corporate Risk:Enterprise risk assessmentFraud/cyber riskRisk based internal audit