FINANCIAL RISK MODELLING

SHE Level 5
SCQF Credit Points 15.00
ECTS Credit Points 7.50
Module Code MMN324976
Module Leader Chioma Nwafor
School Glasgow School for Business and Society
Subject Finance and Accounting
Trimesters
  • B (January start)
  • A (September start)
  • C (May start)

Pre-Requisite Knowledge

Knowledge UK Honours Degree or equivalent

Summary of Content

Business is all about taking risks in order to get a return. The advancement in technology has changed the way we perceive risk and reward, and the way we price and manage them. Firms use advance risk management techniques to identify possible sources of risk, analyse and understand relative importance of risk and how they impact the organisation as a whole. Given the emphasis on risk management in recent years, this module is a combination of enterprise and financial risk modelling using both Excel and @Risk software programs. These software applications will be used to develop simple and complex risk management models. The module aims to develop student's knowledge and understanding of both the framework and practical applications of financial/enterprise risk management. Students will be exposed to the measurement and modelling of the industry accepted categorisation of risks, including qualitative and quantitative risks. The module focuses on issues relating to how losses can arise in any business decision and methods of managing and controlling those losses. The basic issues include Financial Analysis, Describing Risk with Probability Distributions, and Risk Analysis using Monte Carlo Simulations amongst others. In addition to a number of contemporary issues currently influencing risk management, students will also be exposed to different methods of modelling Quantitative and Qualitative risks, Sensitivity and Scenario Analysis, amongst others.

Syllabus

-360 1. Introduction to Excel and @Risk Applications; 2. Data Handling in Excel including: Data Tab, VLOOKUP, PIVOT Table, Charts, and Formulas 3. Understanding Regression Analysis 4. Understanding Probability and Probability Distributions 5. Describing Risk With Probability Distributions 6. Risk and Uncertainty 7. Risk Analysis Using Monte Carlo Simulation 8. Risk and Control Assessment -360 9. Establishing Key Risk Indicators(KRIs) and Key Control Indicators (KCIs) 10. Financial Analysis and Risk Identification 11. Qualitative Risk Modelling Using @Risk Optimization 12. Contemporary Issues in Risk Modelling

Learning Outcomes

On successful completion of this module, students should be able to:1) Demonstrate working knowledge of data handling in Excel, @Risk and how to use them to model different categories of risks. 2) Describe the basic methods for dealing with risks including: sensitivity analysis using data tables and charts; scenario analysis and scenario manager as well as simulations.3) Learn how to model probability distribution of returns, report risk on the basis of those probabilities and produce simple risk model. 4) Learn proven strategies to identify, analyse, and communicate risks to shareholders and corporate stakeholders as well as develop the necessary expertise to manage risk more effectively.5) Discuss different methods of identifying, measuring and monitoring the risks to which a company is subject to. 6) Demonstrate a working knowledge of financial analysis and risk identification.7) Understand how to design Key Risk Indicators (KRIs), Controls and Key Control indicators (KCIs).

Teaching / Learning Strategy

The learning and teaching strategy uses a blended approach of lectures, seminars, labs and directed learning supported by GCU Learn. Lectures will provide the principal mechanism by which key themes are presented; seminars will provide the medium for teamwork and presentation skills to be enhanced by providing an opportunity for students to explore the lecture themes in more detail while the lab sections will provide opportunity for hands-on demonstrations of key lecture themes. The directed learning will be structured around class room lectures for on-campus students and webinars for distance learning (DL) students and will focus on a range of topics related to the course syllabus. Lectures, labs and seminar/online sessions will be facilitated by the module leader and tutors. In addition, one-to-one tutorials are available either via Skype or face-to-face. One of the major components of this module is the application of theoretical concepts in solving real-world problems. To this end, case studies will play an important part in this module. A significant percentage of seminar time will be devoted to discussion of the assigned cases. Students are expected to work in groups and each group is expected to present and hand in assigned cases. The texts will be supplemented by readings from a collection drawn from Journal of Finance, The Journal of Banking and Finance, Journal of Risk and Uncertainty and Journal of Financial Risk Management amongst others. Every student will receive a comprehensive study guide in the form of a module handbook. Feedback strategy - aims Students will be provided with feedback within three weeks of submission. The feedback that they receive is designed to: A: Facilitate the development of self-assessment; B: Encourage dialogue; C: Clarify good performance; D: Provide opportunities to close the gap between current and desired performance; E: Deliver high quality information about individual learning; F: Encourage positive motivational beliefs and self-esteem; G: Provide information to teachers that can be used to help shape the teaching. In order to achieve these aims, the following strategies will be adopted by this module: A: Facilitating the development of self-assessment: The assessment requirements will be discussed in the introduction to the module. Students will be asked to reflect on the standard of their work. B: Encouraging dialogue: Students are encouraged to discuss their comments with lecturers, arrange meetings with academic advisors to review performance. C: Clarifying good performance: Students will be provided with information about marking criteria. They will also be provided with examples of assessments to review in order to identify and clarify good performance (as per A). D: Providing opportunities to close the gap between current and desired performance: Students may find it helpful to identify actions points based on the feedback they have received. E: Delivering high quality information about individual learning: Feedback will be provided within 3 weeks of submission, covering strengths, weaknesses and corrective advice. F: Encouraging positive motivational beliefs and self-esteem: Feedback will be designed to encourage and be constructive. G: Providing information to teachers that can be used to help shape the teaching: Students, if they wish, may identify where they are having difficulties when they hand in their assignments.

Indicative Reading

Core Textbooks -360 1. Alastair L., Day (2009) Mastering Risk Modelling: A Practical Guide to Modelling Uncertainty with Microsoft Excel. Second Edition 2. Morris, J., R., and Daley, P., J., (2017): Introduction to Financial Models for Management and Planning. CRC Press Taylor & Francis Group. Indicative Readings -360 3. Tony Blunden and John Thirlwell (2013): Mastering Operational Risk: A Practical Guide to Understanding Operational Risk and How to Manage It, Second Edition 4. Readings for the Financial Risk Manager Volume 1 and 2 Global Association of Risk Professionals (GARP), -360 5. Understanding Risk: The Theory and Practice of Financial Risk Management: Chapman and Hall Financial Mathematics Series (2007) -360 6. Woods, M. (2011) Risk Management in Organisations: An integrated case study approach, Routledge Journals: -360 1. Journal of Commercial Lending 2. The Journal of Portfolio Management 3. Journal of Risk and Uncertainty 4. Journal of Financial Risk Management 5. Journal of Finance 6. Journal of Forecasting, Journal of Banking and Finance

Transferrable Skills

This module will develop the following skills in a manner that encourages independent initiative and critical thinking: -360b7 Personal and interpersonal skills -360b7 Oral and written communication skills b7 Data gathering, analysis and interpretation b7 Use of Excel and @Risk for data analysis b7 Use of quantitative methods, problem solving and critical thinking. As a part of the broader transferable skills students will be able to demonstrate: 1. Advanced knowledge in the subject area. 2. Use computers as a learning tool to explore models, ideas and for problem solving.

Module Structure

Activity Total Hours
Lectures (FT) 24.00
Independent Learning (FT) 84.00
Assessment (FT) 30.00
Seminars (FT) 4.00
Tutorials (FT) 8.00

Assessment Methods

Component Duration Weighting Threshold Description
Exam (School) 1.00 40.00 45% 1hour online multiple choice exam
Course Work 01 n/a 60.00 45% Group Coursework