Risk Management for Financial Institutions

COURSE DESCRIPTION: Nowadays, business executives have to face more and more complex financial issues in addition to operational issues. As a result, the ability to manage asset and liability risk factors is becoming a key element in the banking industry, in the need of a more robust and comprehensive approach.

This course will provide senior executives with the analytical skills required to improve the performance of their institution and derive more predictable outcomes for the balance sheet. Attendees will learn how to analyse balance sheet information to control risk and improve financial performance. The course begins with an outlook of the current economic environment, transitions into analysis of portfolio risk modelling, and concludes with strategies for managing risk. Activities include group discussions of financial issues currently in the news, short examples, and detailed case problems for analysis and decision making.

COURSE SUMMARY:
The course will cover the following specific areas:

Macro Market Overview: Demystifying the risk management role, Economic environmental scan, What models of credit and collateral risk work and when?, Are there adequate economic scenario predictability models?, Loan, securities and deposit product risk evaluation

Evaluating a Bank's Portfolio Risk Profile: CAMEL analytical method, Measures of financial risk, Evaluating a bank's earnings and profitability, Understanding securities portfolios and building predictability models, Analysing the relationship between funding costs, duration expectations and external resources

Risk Management in a Rapidly Changing Economic Environment: ALCO risk (asset and liability management), Analytical tools and processes for risk management, Early warning signs of portfolio, funding and loan deterioration, Derivatives, swaps and hedges for investments, loans and deposits, Basel capital models applications, Tier 1 and total capital implications, Calculating and predicting risk-based asset performance

Objectives of Financial Institutions Risk Analysis: Bank regulation and due diligence, Credit risks in commercial, consumer and investment portfolios, Liquidity risks, Interest rate risk, Financial leverage and liquidity

Structural Risk and Advanced Risk Management Indices: Review of bank risk profile, Key regulatory issues related to capital adequacy and internal risk management, Due diligence portfolio evaluation application for M&A actions

Analyzing ALCO Management: ALCO management and oversight responsibilities, Assessing ALCO management competency, Assessing model predictability and application to bank balance sheet focus

Analyzing the Impact of Risk Management on Bank Performance: Balance sheet factors that influence bank earnings, Investment strategies that enhance performance, Analysis of overall profitability, Ratio analysis and measures of overall profitability and earnings, Evaluating changes in earnings and profitability

Analyzing Asset and Liability Structure: Loan and deposit product positions, Risk of new offerings in the consumer space (credit cards), Consumer auto (indirect and direct), Commercial and commercial real estate, Direct and syndicated credits, Funding, yield maintenance and prepayment fees, Evaluating pricing scenarios that avoid asymmetric outcomes, Evaluating, Aging portfolio risk, Adverse selection and impact, Modelling bank balance sheet performance, Stress tests

Analyzing Liability Positions: Core deposit gathering methods, Liability management, pricing and durations, Investment securities as a method to control liquidity and enhance returns, Central bank lines as a liability strategy

At the end of the course, attendees will be able to:

• Analyze a bank's balance sheet to identify areas for evaluation and oversight that influence performance
• Utilize the CAMEL analytical approach
• Identify warning signs of potential problems in asset and liability management
• Appreciate the key risk management actions for balance sheet future performance
• Gain insight into how banks manage credit risk, portfolio risk and funding risk
• Appreciate the implications of capital adequacy requirements in a rapidly changing economic environment

TARGET AUDIENCE: Corporate portfolio risk managers, commercial bankers, analysts and associates, credit officers, retail and wholesale deposit product managers, ALCO Committee Members and IT staff.

Course reviews:

“The course has really helped me to gain a better understanding of the balance sheets’ deep mechanisms: I would recommend it to my colleagues as well”
Carlos Ruiz
Senior manager, UNICA Corporation

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