MANAGING RISK IN FINANCIAL INSTITUTIONS

SHE Level 4
SCQF Credit Points 20.00
ECTS Credit Points 10.00
Module Code MHN322841
Module Leader Mauricio Silva
School Glasgow School for Business and Society
Subject Finance and Accounting
Trimester
  • B (January start)

Pre-Requisite Knowledge

Bank Management in a Global Context; Corporate Finance and Financial Strategies or equivalent

Summary of Content

The aim of this module is to provide students with the opportunity to demonstrate an understanding of the concepts of financial and operational risk within financial institutions and in a wider context. The module will provide students with an understanding of the theory of the risks faced by financial institutions and begins with an analysis of financial institutions, and then builds upon this foundation by analysing key risks to which financial institutions are exposed. This will include a detailed analysis of credit, interest rate and market risk. The module will then analyse operational risk analysing the drivers of operational risk management, the regulatory environment and the risk management framework before looking at the development of an enterprise wide approach to risk management. As part of advancing the risk framework students will be provided with applied knowledge in stress testing scenarios, modelling and gain an understanding of mitigation and assurance in operational risk. Students will gain an understanding of practical operational risk management including culture people and risk, reputational risk, outsourcing and operational risk and resilience. Weekly lectures will be delivered followed by weekly seminars.

Syllabus

The what, how and why of financial institutions; Drivers of Operational Risk Management in Financial Institutions; Operational Risk Management Framework I; Operational Risk Management Framework II; Operational risk management framework at Morgan Stanley; Financial Institutions, Financial Risk Management I; Financial institutions, financial risk management II; Financial institutions, financial risk management III; Regulatory Environment I; Regulatory Environment II; Developing Enterprise-Wide Approach to Operational Risk Management; Trends in Operational Risk Management in Financial Institutions. Advancing the Framework I; Advancing the Framework II; Mitigation and Assurance I; Mitigation and Assurance II; Practical Operational Risk Management I; Practical Operational Risk Management II; Practical Operational Risk Management III; Operational Risk and Resilience.

Learning Outcomes

On successful completion of this module, the student should be able to:1. Critically examine the role of financial institutions within the economy;2. Show an understanding of contemporary procedures utilised in the financial risk management of financial institutions including credit, interest rate and market risk;3. Discuss the drivers of operational risk management and the categories of operational risks encountered by financial institutions;4. Analyse how financial institutions manage risks within an operational risk management framework;5. Demonstrate a critical awareness of the current trends in managing the risks encountered by financial institutions6. Demonstrate an awareness of the key elements in advancing the risk framework to include stress testing and scenarios;7. Critically discuss the role of culture, people and risk within the context of a financial institution; 8. Show an understanding of mitigation and assurance techniques in the form of business continuity, insurance and audit; and9. Contribute to the discussion of operational risk and resilience.

Teaching / Learning Strategy

The module provides a combination of lectures, seminars, practical based student activity. The lectures will provide a framework for the analysis of the range of risks encountered by financial institutions and participation in class discussions will provide students with the opportunity to expand their knowledge and understanding of the management of risks in financial institutions. Through the study of relevant cases, students should critically analyse how financial institutions manage risks. The practical element of this module is a one-day interactive training event, hosted and delivered by Morgan Stanley, providing students with an opportunity to consolidate learning and apply their knowledge in a practical context. To engage with industry two guest speakers will be invited to present from other financial institutions. Students will be encouraged to engage in social media tools such as twitter to keep up-to-date with contemporary issues in financial institutions. A: Facilitating the development of self-assessment. Students will be provided with a template for the evaluation of their coursework. They will be encouraged to identify the strengths and weaknesses of their own work in relation to the criteria prior to submission. B: Encouraging dialogue Time will be set aside in seminars to discuss generic feedback. Students will also be encouraged to meet with module tutors to review their personal performance. C: Clarifying good performance. Students will be given clear guidance on requirements using marking criteria sheets and performance level definitions. D: Providing opportunities to close the gap between current and desired performance. Feedback will identify generic and individual action points for improving performance. E: Delivering high quality information about your learning. Feedback will identify strengths, weaknesses and corrective advice. Time will also be set aside in seminars to provide feedback on formative assignments. F: Encouraging positive motivational beliefs and self-esteem. All feedback will be constructive and clear. It will identify strengths in performance. G: Providing information to teachers that can be used to help shape the teaching. Discussion Boards will be utilised to identify the areas of coursework students found most challenging. GCU Learn site. Discussion boards are set up to discuss and provide feedback on both coursework and also to help in exam preparation. GSBS will continue to use the advancement of GCU Learn as a blended learning tool through its teaching and learning as well as through engagement with students. GSBS will ensure that all modules are GCU Learn enabled and with the support of the Learning Technologists at the cutting edge of development of online materials. Academic staff and the Learning Technologists will continue to work together to develop and operate all modules on GCULearn to ensure student support and information sharing. Students are provided with formative and summative feedback via a variety of mechanisms. Feedback on coursework is provided within 3 working weeks of submission.

Indicative Reading

Books and articles: In addition to the main text, other texts, journal articles and web sites will be utilised on this module: Main Texts: Blunden T & Thirlwell J (2013), Mastering Operational Risk, London, FT Prentice Hall Other Texts: CIOBS (2006), Operational Risk Management, Edinburgh. The Chartered Institute of Bankers in Scotland. Alexander, C. (2003), Operation Risk, Regulation, Analysis and Management, London, FT Prentice Hall. Chorafas, D.N. (2004) Operational Risk Control with Basel II, Elsevvier Butterworth-Heinemann, Oxford, Cornett and Saunders (2005) Financial Institutions Management: A Risk Managrement Approach, 5th Edition, New York, McGraw-Hill. Frost, Allen, Porter & Bloodworth (2001) Operational Risk and Resilience, Oxford, Butterworth-Heinemann Hoffman, D.G. (2002) Managing Operational Risk: 20 Firm-wide Best Practice Strategies. Chichester. Wiley International. Hussain, A. (2000) Managing Operational Risk in Financial Markets, Oxford, Butterworth-Heinemann Loader, D (2002) Clearing, Settlement & Custody, Oxford, Elsevvier Buterworth-Heinemann Loader, D (2002) Controls, Procedures & Risk, Oxford, Elsevvier Butterworoth-Heinemann Loader, D (2002) Relationship & Resource Management in Operations, Oxford, Elsevvier Butterworth-Heinemann Loader, D (2003) Regulation & Compliance in Operations, Oxford, Elsevvier Butterworth-Heinemann Journals: Internal Auditing & Business Risk International Journal of Bank Marketing Journal of Banking & Finance Journal of Financial Services Research Journal of Risk Management in Financial Institutions Journal of Operations Management Journal of Risk & Insurance Journal of Risk Management Operational Risk Operational Risk Manager The Service Industries Journal Journal of Financial Intermediation Journal of Money & Credit Trading & Regulations Web Sites: Bank of England: www.bankofengland.co.uk Bank for International Settlement: www.bis.org British Bankers Association: www.bba.org.uk European Central Bank: www.ecb.int FSA: www.fsa.gov.uk International Monetary Fund: www.imf.org International Organisation of Securities Commission: www.iosco.org Risk Centre: www.riskcentre.com The Global Association of Risk Professionals: www.garp.com The Operational Risk Research Forum: www.orrf.org The Outsourcing Institute: www.outsourcing.com The World Bank: www.worldbank.org

Transferrable Skills

This module should develop students' oral and written communication skills. The seminar programme should provide students with the opportunity to develop their critical thinking skills. It should also develop their research skills, report and essay writing skills.

Module Structure

Activity Total Hours
Seminars (FT) 22.00
Assessment (FT) 18.00
Lectures (FT) 22.00
Independent Learning (FT) 138.00

Assessment Methods

Component Duration Weighting Threshold Description
Exam (Dept) 01 n/a 60.00 n/a Continuous Assessment comprising of 4-class MCQ tests (Blackboard)
Course Work 01 n/a 40.00 n/a Coursework: Case Study of a Financial Institution 2500 words