Leadership Development in Risk Managementfelaban.s3-website-us-west-2.amazonaws.com/memorias/...Leadership Development in Risk Management GARP is an Independent Non-Partisan Association

LeadershipDevelopmentinRiskManagement

Insightsfromthe2017GlobalPracticeAnalysis

LatinAmericanRiskCongress

MichaelSellGlobalHeadofInstitutionalOutreachandBusinessDevelopmentSeptember4,2018

Leadership Development in Risk Management

GARPisanIndependentNon-PartisanAssociation

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Ourmissionistoadvancetheriskmanagementprofessionthrougheducation,researchandthepromotionofbestpracticesglobally.

•  Founded1996•  Not-forprofit•  150,000members•  195Countries

•  Globallyrecognizedcertifications(FRM,ERP)fostermeritocracyintheriskprofession

•  Qualityoversight(21memberBoard)•  PractitionerOrientated•  Respectedobjectiveindustryconvener

GARP DOES NOT LOBBY OR ENGAGE IN CONSULTING ACTIVITIES


ThreePillarsSupporttheMission

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GARPBenchmarkingInitiative(GBI)

GARPRiskInstitute(GRI)

ProfessionalCertifications(FRMandERP)

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Global Interest in Risk Certification is Strong and Growing



RiskManagementEcosystem

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•  Governance•  BoardofDirectorsandCEOsetthetone

•  Riskcommitteedefinesstrategicriskobjectives•  CROreportstoorispartoftheriskcommittee

•  RiskManagement•  Risktakers

•  Recommendrisklimits•  Adjustriskexposuresbasedonmarketconditionsandfeedbackfromriskmanagers

•  Riskmanagers•  Approverisklimits•  Monitor,measureandreportrisk,validatemodels,communicateresults

•  Compliance•  Adherencetointernalandexternalrulesandprocedures

•  Governmentoversightandregulation(BaselFramework)•  Accountingstandards(GAAP/IFRS)•  Legaldocumentationandcontracts(ISDA)

RiskManagementEcosystem-“GRC”

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•  Riskmanagement•  Market,credit,operational,andenterpriserisk

•  Modelcontrol•  Construction,validationandbacktesting

•  Treasury•  Analyzethefirm’sfundingandliquiditypoliciesandexposures

•  Regulatorycompliance•  FundamentalunderstandingofBaselregulations

•  Audit•  Analyzeadequacyoffirm’sriskcontrolsandprocesses

InternalStakeholders


•  Governmentregulatoryagencies•  Globalstandards–Basel•  Localmarkets

•  Financialmarketexchanges•  Trading.pricetransparencyandmarketliquidity•  Centralclearing

•  Accountingandconsultingfirms•  Auditandregulatorycompliance•  Risk-basedtechnologysolutions

•  AcademicInstitutions•  Riskeducationandresearch

ExternalPlayers

8 Leadership Development in Risk Management

•  Knowledge•  Requiredtoperformessentialriskmanagementtasks

•  Experience•  Markets,currenttrendsandhistoricalcontext

•  Professionaldevelopment•  Communicationskillsarecritical•  Continuingeducation–lifelonglearning

DevelopingFutureLeadersinRiskManagement



InsightsfromGARP’sGlobalPracticeAnalysis

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•  Takingafreshlookatthepracticeoffinancialriskmanagementtounderstand:o  Whofinancialriskmangersareo  Whatspecifictaskstheyperformo  Whatcriticalknowledgetheyneed

WhatisaGlobalPracticeAnalysis?

•  Applyingtheresultsto:o  InformFRMexamcontentandcurriculumo  HelpGARPbetterdesignofferingsandbuildprogramsofinteresttotherisk

managementcommunity(e.g.,webinars,Conventiontracks)o  InformGARP’sContinuingProfessionalDevelopment(CPD)initiatives

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“Toidentifytheknowledgeandskillsnecessaryforcompetentpractice,itisimportanttocompleteananalysisoftheactualworkperformedandthendocumentthetasksandresponsibilitiesthatareessentialtotheoccupationorprofessionofinterest.”



SurveyStructureandDemographics

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DomainsofPractice–TasksRiskManagersPerform49Process-BasedTasksAcross6Domains

FinancialRiskFramework(9tasks)

FinancialRiskIdentification(5tasks)

FinancialRiskMeasurementandModeling(12tasks)

FinancialRiskMonitoring(7tasks)

FinancialRiskManagement(10tasks)

FinancialRiskReporting(6tasks)



KnowledgetoPerformRiskManagementTasks174KnowledgePoints

Foundational(89knowledgepointsacross10areas)Overviewoffinancialriskmanagement(4knowledgepts)Assetclassesandfinancialinstruments(12knowledgepts)InstitutionalFrameworkofMarkets(5knowledgepts)RegulatoryEnvironment(4knowledgepts)Accounting(9knowledgepts)Economics(8knowledgepts)Statisticalandprobabilityanalysis/econometrics(9knowledgepts)Financialmathematics(24knowledgepts)Modeling(10knowledgepts)Technology(4knowledgepts)

Non-Foundational(85knowledgepointsacross5areas)MarketRisk(12knowledgepts)LiquidityandTreasuryRisk(17knowledgepts)CreditRisk(27knowledgepts)OperationalRisk(17knowledgepts)EnterpriseRisk(12knowledgepts)

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SurveyRatingScales

•  Domains •  Importanceofdomaintotheprofessionoffinancialriskmanagementingeneral

(Not,Somewhat,Moderately,Extremely)•  Percentageoftimerespondentspendsperformingtasksinthedomain

(0%to100%)

•  Tasks•  Importanceofeachtasktorespondent’sownwork

(Not,Somewhat,Moderately,Extremely)•  PointofAcquisitionwhenafinancialriskmanagershouldbeabletoperformeachtask

(Notnecessary,<2yrs.,2to5yrs.,6to10yrs.,>10yrs.)

•  Knowledge•  Importanceofeachknowledgeareatorespondent’sownwork

(Not,Somewhat,Moderately,Extremely)•  PointofAcquisitionwhenafinancialriskmanagershouldacquiretheknowledge

(Notnecessary,<2yrs.,2to5yrs.,6to10yrs.,>10yrs.)

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•  3,210respondentswithawiderangeofexperience•  52%FRMs

•  125countries•  Top10:US,China,India,UK,HongKong,Canada,Switzerland,Singapore,Spain,Germany

•  RespondentsfromLATAMincludeBrazil,Columbia,andPeru

•  71%heldMasters,orhigher,degrees

•  Manyheldothercertifications(e.g.,CFA,CPA,ERP,ACCA,CAIA)

•  3:1ratiobetweenmaletofemalesurveyparticipants

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HighLevelDemographics


Top10BusinessTypesandJobTitles

Top10BusinessTypes(100%) Top10JobTitles(85%)1 Bank(43%) Riskmanager(30%)2 Consulting(17%) Analyst(24%)3 Assetmanagement(16%) Consultant(11%)4 Broker/dealer(6%) Portfoliomanager(5%)5 Insurance(6%) Auditor(3%)6 Government(5%) Productmanager(3%)7 Nonfinancialcorporate(4%) Trader(3%)8 Academiaorresearchorganization(3%) Informationtechnology(2%)9 Energy(1%) Modeldeveloper(2%)10 Other(1%) Regulator/examiner(2%)


• 76%frombanks,consultingfirms,orassetmanagementcompanies• 70%wereriskmangers,analysts,consultantsorportfoliomanagers

YearsofExperience

YearsofExperienceFinancialRiskManagement

FinancialServicesIndustry

Upto2yrs. 22% 11%

2to5yrs. 37% 28%

6to9yrs. 21% 24%

10to15yrs. 12% 20%Morethan15yrs. 7% 17%


•  54%with6to9yearsinfinancialserviceshadlessthan5yearsinrisk•  64%with10to15yearsinfinancialserviceshadlessthan10yearsinrisk

DistributionofTimeSpentinRiskRelatedActivities

Percentageoffinancialriskmanagementtimeineachactivity

Iperformfinancialriskmanagementtasks 50%

Isupervisepeoplewhoperformfinancialriskmanagementtasks 15%

Iconsulttofinancialriskmanagementprofessionals 10%

Iamnotcurrentlyinvolvedinfinancialriskmanagement 10%

Iteachortrainfinancialriskmanagementprofessionals 7%

Iauditthefinancialriskindustry 5%

Iregulatethefinancialriskindustry 3%

•  Mostsurveyrespondentsindicatedtheyspendtheirtime“doing”riskmanagementtasks.

•  Buttheyalsospendtimesupervising,teaching,regulating,auditing,andconsulting.


DistributionofTimeSpentinEachAreaofRiskManagement

Creditrisk,28%

Marketrisk,30%

Operationalrisk,17%

LiquidityandTreasuryrisk,12%

Enterpriserisk,9%

Other*,4%


ProfilesofPractice


RelativeImportanceofEachPracticeDomain

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0%

5%

10%

15%

20%

25%

RiskFramework RiskIdentification RiskMeasurementandModeling

RiskMonitoring RiskManagement RiskReporting

16%

22%

18%

16% 16%

12%

WeightedProfilesofPractice(%ofTimexMeanImportance)


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ProfilesofPracticeVarybyAreaofRiskSpecialization

0%

5%

10%

15%

20%

25%

30%

Credit Market LiquidityandTreasury Enterprise Operational

FinancialRiskFramework FinancialRiskIdentification FinancialRiskMeasurementandModelingFinancialRiskMonitoring FinancialRiskManagement FinancialRiskReporting


0%

5%

10%

15%

20%

25%

30%

FinancialRiskFramework FinancialRiskIdentification

FinancialRiskMeasurementand

Modeling

FinancialRiskMonitoring FinancialRiskManagement

FinancialRiskReporting

<2yrs 2to5yrs 6to9yrs 10to15yrs >15yrs

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ProfilesofPracticeChangewithExperience


TasksPerformed


Top10TasksandRelatedPracticeDomains1.   Identifysignsofpotentialriskbasedonexposure,trends,monitoringsystems,regulatoryand

environmentalchange,organizationalcultureandbehavior.(Identification)

2.   Analyzeandassessunderlyingriskdriversandriskinterconnections.(Identification)

3.   Communicatewithrelevantbusinessstakeholders.(Monitoring)

4.   Monitorriskexposureincomparisontolimitsandtolerances.(Monitoring)

5.  Evaluatematerialityofriskandimpactonbusiness.(Management)

6.  Interpretresultsofmodelorriskmeasureandmodifyusingexpertjudgment.(Monitoring)

7.  Identifyriskowners.(Framework)

8.   Investigatewhylimitsareexceededbyperformingroot-causeanalysis.(Monitoring)

9.  Generate,validate,andcommunicatestandardizedriskreportsforinternalpurposes(e.g.staff,executivemanagement,boardofdirectors).(Reporting)

10. Definerisklimitsandtolerancesfortheorganization.(Framework)


Top5TasksbyAreaofRiskSpecializationProcessBasedTasks Credit MarketOpRisk Liq.&Treas.

Enterprise

Identifysignsofpotentialrisksbasedonexposure,trends,monitoringsystems,regulatoryandenvironmentalchange,organizationalcultureandbehavior C M O L E

Monitorriskexposureincomparisontolimitsandtolerances C M E

Interpretresultsofmodelorriskmeasureandmodifyusingexpertjudgment C M L

Evaluatematerialityofriskandimpactonbusiness C O L

Communicatewithrelevantbusinessstakeholders C L

Analyzeandassessunderlyingriskdriversandriskinterconnections M O

Investigatewhylimitsareexceededbyperformingroot-causeanalysis M L

Identifyriskowners O E

Prioritizerisksbasedontheirexpectedfrequencyandseverity O

Definerisklimitsandtolerancesfortheorganization E

Setriskmanagementframework,includingriskappetite,riskculture,andcorporategovernance E


RequiredKnowledge


KnowledgeRatings

MeanImportanceofKnowledgebyAreaofRiskSpecialization

Market Credit Liquidity&Treasury Operational Enterprise

Foundational/crosscutting(89KPs) 3.01 2.99 3.01 3.00 2.99

MarketRisk(12KPs) 3.19 2.91 3.15 2.91 3.01

CreditRisk(27KPs) 2.81 3.28 2.99 2.83 3.03

LiquidityandTreasuryRisk(17KPs) 2.79 2.85 3.34 2.83 3.00

OperationalRisk(17KPs) 2.50 2.66 2.84 3.21 3.03

EnterpriseRisk(12KPs) 2.67 2.87 3.04 3.10 3.45


Top10FoundationalKnowledgePoints1.  Basicrisktypes(e.g.,market,credit,operational)

2.  Interestrates,foreignexchangerates,inflationanddeflation

3.   Howriskmanagementcanaddvalue

4.   Marketparticipants(e.g.,banks,insurancecompanies,funds)

5.   Casestudies/Lessonslearned

6.  Riskmeasures(e.g.,expectedshortfall,valueatrisk)

7.  Monetarypolicy(e.g.,monetarypolicyinstruments,exchangeratepolicies)anditsrelationwithfinancialmarkets

8.  Valuationmethods(e.g.,netpresentvalue,simulations,replication)

9.  Derivatives(includingswapsandoptions)

10. Discountrates(e.g.,LIBOR,OIS)


Top10FoundationalKnowledgePointsareConsistentoverTime

RankingsofFoundationalKnowledgePointsAtDifferentLevelsofYearsofExperience

<2yrs

2to5yrs

6to9yrs

10to15yrs

>15yrs

Basicrisktypes(e.g.,market,credit,operational) 1 1 1 1 1

Interestrates,foreignexchangerates,inflationanddeflation 2 2 3 2 2

Casestudies/Lessonslearned 3 6 5 8 2

Howriskmanagementcanaddvalue 4 3 2 3 4Monetarypolicy(e.g.,monetarypolicyinstruments,exchangeratepolicies)anditsrelationwithfinancialmarkets 4 6 9 9 10

Valuationmethods(e.g.,netpresentvalue,simulations,replication) 6 6 11 7 9

Riskmeasures(e.g.,expectedshortfall,valueatrisk) 7 5 6 5 6

Derivatives(includingswapsandoptions) 7 10 10 11 15

Baselframework 9 21 7 6 18

Marketparticipants(e.g.,banks,insurancecompanies,funds) 10 4 4 4 11


Top10Non-FoundationalKnowledgePoints1.  Marketriskdrivers(e.g.,exchangerates,interestrates,equity,liquidity)

2.  Scenarioandstressanalysis

3.  Valuationriskcategories(e.g.,marketpriceuncertainty,modelrisk,concentration)

4.  Creditriskdrivers(e.g.,macro-economicconditions,industryconditions,companyorindividual-specificconditions)

5.  Modelsformarketrisk(e.g.,VaR,LVaR)

6.  Limits(e.g.,exposurelimits,concentrationlimits)

7.  Measuresofportfoliocreditriskexposure(e.g.,expectedloss,unexpectedloss,concentration)

8.  Measuresofindividualcreditriskexposure(e.g.,probabilityofdefault,exposureatdefault,loan-to-valueratio,scorecards)

9.  Measuresofcounterpartycreditrisk(e.g.,expectedexposure,potentialfutureexposure)

10.  Definitionofeventsofdefault


Top5KnowledgePointsforMarketRisk1.  Marketriskdrivers(e.g.exchangerates,interestrates)

2.  Modelsformarketrisk(e.g.VaR,LVaR)

3.   Valuationriskcategories(e.g.,modelrisk,concentrationrisk)

4.   Scenarioandstresstesting

5.  Swaps,futures,forwards,andoptions


Top5KnowledgePointsforCreditRisk1.   Creditriskdrivers(e.g.macro-economicconditions,industryconditions,companyor

individual-specificconditions)

2.  Measuresofindividualexposurecreditrisk(e.g.,PD,EAD,LTV)

3.  Measuresofportfoliocreditrisk(e.g.,EL,UL,concentration)

4.  Creditlifecycle(e.g.,performing,delinquent,default)

5.   Definitionofeventsofdefault


Top5KnowledgePointsforOperationalRisk1.   Categoriesandsourcesofoperationalrisk(e.g.,people,processes,systems)2.  Compliancerisk

3.  Riskandcontrolself-assessment

4.   Threatstobusinesscontinuity(e.g.,systemandvendordependence,cybercriminals,naturalcatastrophe)

5.   Reputationalrisk


Top5KnowledgePointsforLiquidityandTreasuryRisk1.   Fundingstability

2.  Assetliquidity

3.   Liquiditymetrics(e.g.,liquiditycoverageratio,netstablefundingratio)

4.  Sourcesofliquidityrisk(e.g.,market-driven,customer-driven,companyspecific,maturitymismatch)

5.  Balancesheetmanagement(e.g.,ALMmatchingfundingtypes)


Top5KnowledgePointsforEnterpriseRisk1.   Riskpoliciesandlimitsframework

2.  Roleofriskmanagementinorganizations

3.   Riskgovernanceframework(e.g.,3linesofdefense,segregationofduties,independentoversight)

4.  Integratedriskmanagement(e.g.,interactionbetweencredit,market,andoperationalrisk)

5.   Riskappetitedefinitionandimplementation


EmergingEducationalNeedsofRiskManagers


TopicsofInteresttotheGlobalRiskManagementCommunityFoundational•  Accounting•  Quantitative/statisticalskills•  Regulations(CCAR,IFRS9,FRTB)•  Derivatives(pricing,valuation,strategies,risks,

accounting)ToolsandTechniques•  Riskmodeling•  Scenarioanalysis•  Hedging(strategies,techniques,accounting)•  VaRTech-related•  Computerlanguages(R,Python,VBA,SAS,Matlab)•  Cyberriskmanagement•  Datascience(AI,ML,BigData,etc.)•  FinTech•  Blockchain

Traditional•  Marketrisk•  Interestraterisk•  FXriskmanagement•  Liquidityrisk(measurement,management,

modeling)•  ALM•  Creditrisk(modeling,management)•  Counterpartycreditrisk•  XVA•  Operationalrisk•  Non-FinancialRisks•  Riskgovernance•  Riskappetiteframework•  Compliance•  Conductrisk


ContactUsAnytime

Developing Risk Management Leadership

MichaelSell:[email protected]:[email protected]

TheFRMProgram


42

GPA Ensures the FRM is Aligned to Industry Practice

MAINTENANCE ACCEPTANCE RELIABILITY VALIDITY

Oversight & governance Psychometric

analysis Industry

acceptance

✓Continuing

education and network


TheFRMJourneyBeginswiththeExam

FRMExamPartI:Toolsusedtoassessrisk(4hours,100multiplechoicequestions)•  FoundationsofRiskManagement•  QuantitativeAnalysis•  FinancialMarketsandProducts•  ValuationandRiskModels

FRMExamPartII:Practicalapplicationofthosetools(4hours,80multiplechoicequestions)•  MarketRiskMeasurementandManagement•  CreditRiskMeasurementandManagement•  OperationalandIntegratedRiskManagement•  RiskManagementandInvestmentManagement•  CurrentIssuesinFinancialMarkets

20%-20Questions30%-30Questions30%-30Questions

20%-20Questions

25%-20Questions25%-20Questions25%-20Questions15%-12Questions

10%-8Questions

VoluntaryCPD40hours/2years

CertifiedFRM

2yearsofrelevantworkexperience



ProgramRegistrationTimelineandFeesCertificationProgramEnrollmentandExamRegistrationFees

November17,2018 May18,2019

EnrollmentFee US$400 Validfor4Years Validfor4Years

LocationFee* US$40

EarlyRegistration* US$350 May1–July31st,2018 Dec1st,2018–Jan31st,2019

StandardRegistration* US$475 Aug1st–Aug31st,2018 Feb1st–Feb28th,2019

LateRegistration* US$650 Sept1st–Oct15,2018 Mar1st–April15th

*FeesforeachExam(PartI&PartII)

•  Enrollment fee includes 1 year complimentary GARP membership •  Candidates can elect to take both Part I and Part II on the same date; however, candidates

must pass Part I to have Part II exam scored •  FRM and ERP Exams are offered at more than 90 sites around the world •  Deferral policy: Can defer Exam registration one time to next exam. $150 fee

RelativeImportanceofEachPracticeDomain

ImportanceofDomaintoWorkofFinancialRiskManagers

%ofWorkTime Not Somewhat Moderately Extremely Total

(mean)

FinancialRiskFramework11% 1% 12% 34% 53% 3.39

FinancialRiskIdentification15% 0% 5% 29% 65% 3.59

FinancialRiskMeasurementandModeling21% 1% 5% 33% 61% 3.55

FinancialRiskMonitoring17% 1% 5% 34% 60% 3.54

FinancialRiskManagement15% 0% 5% 30% 65% 3.59

FinancialRiskReporting16% 1% 9% 41% 49% 3.38

Other5%


Leadership Development in Risk Managementfelaban.s3-website-us-west-2.amazonaws.com/memorias/...Leadership Development in Risk Management GARP is an Independent Non-Partisan Association

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