Home 》PRM 》 Program Outline 》
Overview of Risk Management, Corporate Risk Management and the Theory of Risk and Return
- Understand a common definition of financial risk
- Understand the general role that a risk manager plays in a company, financial or non-financial
- Understand some of the basic language used by financial risk managers, including risk types like Market Risk, Credit Risk, Operational Risk, Reputation Risk, Legal Risk, Business Risk, Liquidity Risk
- Understand that a balance between risk and reward is a choice that can be managed
- Understand some basic steps towards implementing a financial risk management program
- Understand the concept of hedge accounting
- Understand the use of hedging at Merck as an example
- Understand the concept of diversification
- Understand the concept of the efficient frontier
- Understand the basic concept of a call option’s value
- Understand the concept of risk-adjusted returns
Governance in Risk Management and PRMIA Standards
- Understand the concept and importance of Governance
- Understand the role of the Board of Directors
- Understand a typical financial risk management structure
- Understand basic risk management policies
- Understand the importance and meaning of an Escalation Policy
- Understand the role that external parties play in governance (external audit, regulators, “the market”)
- Know the ten core PRMIA Governance Principles
- Understand how the PRMIA Governance Principles Apply to the Board
- Understand how the PRMIA Governance Principles Apply to the Finance and Accounting Function
- Understand how the PRMIA Governance Principles Apply to the Risk Management department
- Know the PRMIA Standards of Best Practice, Conduct and Ethics for Professional Risk Managers
- Understand the Positive Role that risk management plays in the business process
- Understand the basic operations of the PRMIA organization and practices
An Introduction to Financial Markets
- Understand the types of instruments in the Money Markets
- Understand the basic characteristics of Bond Markets
- Understand the basic characteristics of Stock Markets
- Understand the basic characteristics of Foreign Exchange Markets
- Understand the basic characteristics of Futures Markets
- Understand the basic characteristics of OTC Markets
- Understand the basic characteristics of Commodities Markets
- Understand the basic characteristics of Energy Markets
Interest Rate Risk and Hedging
- Understand the definition of interest rate risk
- Understand how changes in yields affect bond prices
- Understand how changes in the shape of the yield curve affect bond prices
- Understand the concepts of duration and convexity
- Understand the calculation of risk in a single security versus a portfolio of securities
- Understand the basic principles of a swap
- Understand the basic principles of Puts and Calls
- Understand the basic concept of Caps and Floors
- Understand the basic concepts of Swaptions, Exotics and Financial Engineering
Market Risk and Asset-Liability Management
- Understand the concept of notional amounts of exposure
- Identify and define “The Greeks” as measures of market risk
- Understand the basic concepts behind Value at Risk
- Understand the use of Value at Risk in setting Risk Limits
- Understand different approaches to determining Value at Risk measures
- Understand situations in which these approaches work or don’t work
- Understand the concepts of Stress Testing and Extreme Events
- Understand the process of Scenario Planning
- Understand the definition and implications of Liquidity Risk
- Understand the role of the ALCO
- Understand the concept of funding gaps
- Understand the concept and implications of duration gaps
- Understand some measures of liquidity risk
- Understand the concept of funds transfer pricing
Retail and Commercial Credit Risk Management and Risk Management Practices
- Understand the role that a Credit Officer plays
- Understand the unique concerns of retail credit risk
- Understand the concept of Credit Scores
- Understand the concepts of Default, Default Rates and Loss Rates
- Understand the factors involved in determining the Value of a Customer
- Understand how securitization can transfer risk
- Understand the concept of pricing risk
- Understand the role that Rating Agencies play in measuring credit risk
- Understand the basic credit ratings from these agencies
- Understand the implied impact of migration in credit ratings
- Understand internal rating scores and methods
- Understand basic financial measures in a loan risk assessment
- Understand the concept of Loss Given Default
- Understand common types of Counterparty Credit Risk
- Understand the use and importance of Credit Models
- Understand the calculation of risk in a single credit versus a portfolio of credits
- Understand the concepts behind Credit VaR
- Understand the concepts behind Credit Metrics models
- Understand the concepts behind MKMV models
- Understand the concepts behind actuarial and reduced-form models
- Understand the basic types of credit derivatives
Operational Risk and Performance Measures
- Understand what constitutes an operational loss and how might we quantify it
- Understand how operational events are linked to other risk types, such as market, credit, liquidity or reputation risk
- Understand the concept of a key risk indicator
- Understand the concept of a key risk driver
- Understand how to differentiate a key risk indicator from a key risk driver
- Understand a basic Operational Risk Framework
- Understand an approach to implementation of an Operational Risk framework
- Understand how to implement a simple scenario-based process for assessing and quantifying operational risks
- Understand how to assess risks relating to new business processes, products or change management initiatives
- Understand the concept of mitigation and examples of mitigation techniques
- Understand the role of insurance in Operational Risk transfer
- Understand the concept and definition of risk capital
- Understand core uses of risk capital
- Be able to compare and contrast risk capital and regulatory capital
- Understand the definition of RAROC
- Understand some uses of RAROC in business decision making
Case Studies and derivatives best practices
- Understand the lessons of the Metallgesellschaft Case Study
- Understand the governance lessons from Orange County
- Understand the governance lessons from Riggs Bank
- Understand the core principles behind the Group of Thirty Report – Recommendations on Derivatives Use
- Understand the Market Risk lessons from the LTCM Case Study
- Understand the ALM lessons from the Continental / Penn Square Case Study
- Understand the retail credit risk lessons from Bankgesellschaft Berlin
- Understand the lessons in Credit Risk from the Credit Lyonnais Case Study
- Understand the Operational Risk lessons from the NAB F/X Options Case Study
- Understand the Operational Risk lessons from the Barings Case Study
- Understand the Governance lessons from the WorldCom Case Study (from PRMIA Standards)
- Understand the Governance lessons from the Banker’s Trust Case Study (from PRMIA Standards)
- Understand the Governance lessons from the Daiwa Case Study (from PRMIA Standards)