Introduction

• What do we really mean by risk management in asset management?
• Understanding the roles, responsibilities and goals of the stakeholders in the Asset Management business
• What can RM deliver and not deliver? Who is going to deliver it?
• What do we mean by market, credit, operation, liquidity, and reputational et. al. risks?
• Who owns the risk? Who has responsibility for the risk? Who can manage the risk?

The Risk Framework

• How do we create a risk framework? How do we monitor it is working?
• The IQM process
  
  • identify risk and its relationships
  • quantify risk and its relationships
  • manage risk and its relationships
• The risk management structure – the three Ps ~ Policy ~ Process ~ People
• Risk appetites, limits, boundaries and mandates
• Roles and responsibilities, reporting and action
• How do we deal with non-linearity and complexity?
• How do we deal with interdependence?
• What about the gaps?

Market Risk (MR) Focus

• Understanding traditional asset manager MR metrics and their limitations
  
  • Sharpe ratio
  • information ratio
  • tracking error
  • benchmark-relative risk
  • Alpha
  • Beta
  • absolute vs. relative measures
• Understanding more comprehensive approaches to MR and their potential shortfalls
  
  • Value-at-Risk (VaR) and Expected Shortfall (ES)
  • in its various guises
  • Extreme Value Theory (EVT)
  • what does it bring?
  • data issues
  • completeness, proxies, accuracy
  • forecasting e.g. GARCH
  • is the future like the past?
  • stress test, reverse stress testing and scenarios
  • who does it? How good can it be?
  • performance attribution and other risk-return measures

Liquidity Risk Focus

• What is liquidity risk and why should we care?
• How is market risk related to liquidity risk?
  
  • volatilities
  • regimes and cycles
  • bid-offer
  • market impact effects
  • implications for valuation and liquidation
• How does liquidity risk manifest itself in market shocks?

Credit and Counterparty Risk Focus

• What kinds of credit and counterparty risk does an Asset Manager run?
• How are the risks related to market and liquidity risk?
• Typical situations including
  
  • collateral agreements
  • repos
  • ISDA Master/Schedule/Confirm
  • OTC derivative transactions
  • cash management
• Credit exposure measurement technology
• Limits structure and potential hedging strategies including credit derivatives

Operational Risk Focus

• What kinds of operational risk does an Asset Manager run?
• Special attention to client facing activities and servicing:
  
  • identifying the customer
  • classification and typing of customer
  • regulatory risk warnings, money laundering, appropriateness of products and other considerations
  • client money and asset ring fencing
• General operational risks
  
  • system design and appropriateness
  • security and access
  • STP vs. manual intervention
  • loss databases
  • KPIs and KRIs
  • what are they for?
• How can this go wrong? How are the errors related to other risk factors?