The Banking and Corporate Finance Training Specialist

Enterprise Risk Management

(ERM)

A 3-Day Training Course for Bankers & Non Bankers

This course can be presented in-house for you on a date of your choosing

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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

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 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,

Course Description

Background of the trainer

Course Objectives

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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.

Course Outline

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

Course Content

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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 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

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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 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

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09:30-17:00

London

Standard Price: £1,350 + VAT Membership Price: £1,080 + VAT

Delivering this course in-house for you to a number of participants could be very cost effective.

Session 12: New Challenges Regulatory changes

Governance and strategic risks Refreshing the profile Reputational risks

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

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.

Course Summary