You are previewing A Risk Professional's Survival Guide: Applied Best Practices in Risk Management.
O'Reilly logo
A Risk Professional's Survival Guide: Applied Best Practices in Risk Management

Book Description

Balanced, practical risk management for post - financial crisis institutions

Fundamentals of Risk Management fills a critical gap left by existing risk management texts. Instead of focusing only on quantitative risk analysis or only on institutional risk management, this book takes a comprehensive approach. The disasters of the recent financial crisis taught us that managing risk is both an art and a science, and it is critical for practitioners to understand how individual risks are integrated at the enterprise level.

This book is the only resource of its kind to introduce all of the key risk management concepts in a cohesive case study spanning each chapter. A hypothetical bank drawn from elements of several real world institutions serves as a backdrop for topics from credit risk and operational risk to understanding big-picture risk exposure. You will be able to see exactly how each rigorous concept is applied in actual risk management contexts. Fundamentals of Risk Management includes: * Supplemental Excel-based Visual Basic (VBA) modules, so you can interact directly with risk models * Clear explanations of the importance of risk management in preventing financial disasters * Real world examples and lessons learned from past crises * Risk policies, infrastructure, and activities that balance limited quantitative models

This book provides the element of hands-on application necessary to put enterprise risk management into effective practice. The very best risk managers rely on a balanced approach that leverages every aspect of financial operations for an integrative risk management strategy. With Fundamentals of Risk Management, you can identify and control risk at an expert level.

Table of Contents

  1. Preface
  2. Acknowledgments
  3. About the Author
  4. CHAPTER 1 Navigating Risk at SifiBank
    1. Overview
    2. Financial Intermediation and Profit Maximization
    3. SifiBank Structure and History
    4. SifiBank Organizational Structure and Oversight Governance
    5. Bank Regulatory Landscape
    6. Summary
    7. Questions
    8. Notes
  5. CHAPTER 2 Overview of Financial Risk Management
    1. Risk Management Defined
    2. Elements of Risk Management
    3. Risk Identification and Typology
    4. Risk Measurement
    5. Risk Analysis
    6. Risk Mitigation
    7. Summary
    8. Questions
  6. CHAPTER 3 Risk Governance and Structure
    1. SifiBank’s Risk Governance—The Early Years
    2. Prescriptions for Strong Risk Governance
    3. Questions
    4. Notes
  7. CHAPTER 4 Economic Capital, Risk-Adjusted Performance, and Capital Allocation
    1. SifiBank’s Business Problem
    2. Economic Capital and Value-at-Risk
    3. Stress Testing and Scenario Analysis
    4. Risk-Adjusted Performance Measurement
    5. Risk-Adjusted Performance Optimization
    6. Summary
    7. Questions
    8. Notes
  8. CHAPTER 5 Credit Risk Theory
    1. Overview
    2. Portfolio Credit Risk Dynamics
    3. Analytic Methods for Credit Portfolio Assessment
    4. Counterparty Risk
    5. Summary
    6. Questions
    7. Notes
  9. CHAPTER 6 Consumer Credit Risk Measurement
    1. Overview
    2. Measuring Product Expected Loss
    3. Incorporating Borrower Options Into Risk Views and Competing Risk Assessment
    4. Loss Severity
    5. Generating Credit Loss Estimates
    6. Loan Loss Reserving and Forecasting
    7. Unexpected Loss
    8. Summary
    9. Questions
    10. Notes
  10. CHAPTER 7 Commercial Credit Risk Overview
    1. SifiCommercial Lending Division
    2. Developing Risk Ratings
    3. Risk-Rating Scorecard Process
    4. Loan Review Process
    5. Rating CRE Loans
    6. Commercial Loan Syndication
    7. Summary
    8. Questions
  11. CHAPTER 8 Credit Risk Mitigation
    1. Overview
    2. Insurance Contracts
    3. Credit Derivatives and Risk Mitigation
    4. Credit Default Swap Mechanics
    5. Credit-Linked Note Mechanics
    6. Collateralized Debt Obligation Mechanics
    7. Credit Hedging Outcomes
    8. Summary
    9. Questions
  12. CHAPTER 9 Interest Rate Risk
    1. Overview of SifiBank’s Interest Rate Risk Exposure
    2. Principal Components Analysis
    3. Analytic VaR Measurement of Interest Rate Risk
    4. Monte Carlo VaR Interest Rate Risk Methods
    5. Modeling Interest Rate Risk of More Complex Instruments
    6. Summary
    7. Questions
    8. Notes
  13. CHAPTER 10 Market Risk
    1. Calculating VaR for a Portfolio
    2. Simulation Analysis and VaR
    3. Position Limits Policies
    4. VaR Limitations and Issues
    5. Summary
    6. Questions
  14. CHAPTER 11 Liquidity Risk Management
    1. SifiBank’s Exposure to Liquidity Risk
    2. SifiBank’s Approach to Liquidity Risk Management
    3. Stress Testing the Liquidity Profile
    4. Liquidity Contingency Planning
    5. Liquidity Measurement
    6. Summary
    7. Questions
    8. Notes
  15. CHAPTER 12 Market Risk Hedging
    1. Overview
    2. Hedging Principles and Basics
    3. Hedging Using Futures Contracts
    4. Rolling Hedges and Risks
    5. Hedging Using Options
    6. Delta Hedging
    7. Summary
    8. Questions
    9. Notes
  16. CHAPTER 13 Hedging Interest Rate Risk
    1. Overview
    2. Hedge Instrument Alternatives
    3. Summary
    4. Questions
    5. Note
  17. CHAPTER 14 Operational Risk Management
    1. Overview
    2. Internal Controls Assessment
    3. Quantitative Assessment of Operational Risk
    4. Regulatory Standards
    5. Cyber-Security Risk
    6. Summary
    7. Questions
    8. Notes
  18. CHAPTER 15 Model, Regulatory, Legal, and Reputational Risk Management
    1. Overview
    2. Model Risk
    3. Data Errors
    4. Model Assumptions
    5. Risk Layering
    6. Guarding against Model Risk
    7. Regulatory Risk
    8. Legal Risk
    9. Reputation Risk
    10. Summary
    11. Questions
    12. Note
  19. CHAPTER 16 Toward Integrated Risk Management
    1. Overview
    2. Defining Integrated Risk Management
    3. Key Risk Integration Points
    4. Aligning Risk Infrastructure with Risk-Taking
    5. Summary
    6. Questions
  20. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
  21. Index
  22. End User License Agreement