Financial Risk: Identification, Measurement and Management Techniques Seminar

Exposure to changes in interest rate, currency, equity and commodity markets is a fact of life but effectively measuring and managing those risks can mean the difference between profitability and loss. Selecting the product and risk hedging strategy that makes sense for a particular company and situation requires care and a solid understanding of the financial instrument tools and applications available in the market.

This 1 ½ day, expert-facilitated program is uniquely designed to help treasury professionals build competency-based skills for identifying, measuring and managing financial risk exposure.

The format combines presentations, case studies and application-focused checklists to cover risk analysis from assessment to evaluation, and will bridge the gap between theory and practice with:

• an initial overview of fundamental concepts and tools used to manage exposure to changes in interest rate, currency, equity and commodity markets
• discussions on ways to measure the risk-return tradeoff of popular financial instruments and related applications with respect to economic, operational and structural attributes
• a focus on practical implementation issues such as data selection, valuation and hedge effectiveness testing

• identify effective financial instruments used for managing risk from interest rate, currency, equity and commodity changes
• recognize effective risk management processes and procedures for using financial instruments
• measure the risk-return tradeoff of popular financial instruments and related applications with respect to economic, operational and structural attributes
• deal with practical implementation issues such as data selection, valuation, hedge effectiveness testing

• a basic understanding of derivatives and financial risk management as demonstrated by earning the CTP/CCM designation
• 5+ years experience in corporate treasury, accounting or finance operations
• an interest in learning more about how to
  
  • measure and manage financial risk
  • select the product tools and risk hedging strategy that makes sense for a particular company and situation

• Case studies with answer sheets and highlighted concepts and computations
• Application-focused checklists
• AFP's Risk Management: A Risk Mapping Guide

Includes a sample risk management process checklist, risk mapping methodology, and a sample Excel Workbook for making risk maps.

Risk Identification: The Building Blocks
Financial risk management starts with an evaluation of corporate objectives

• Evaluation of corporate objectives
• Identifying the primary objective and constraints
• Consequences of risk management inaction

Putting a Process in Place
The Elements of a Risk Management Process Effective risk management is a disciplined process that requires a constant review of policies and procedures. This module will look at elements of the risk management process

• Achieving executive acceptance of investment risk management
• Education/information levels required of treasury, operations and accounting staff
• Critical elements of a good investment risk management system
• Impact of technology
• Checks and balances to minimize derivatives- related losses

Introduction to Derivative Instruments
Information about the types of derivatives, unique risks and applications. Futures, forwards, options and swaps will be covered in general terms. Examples will draw from different asset classes, including fixed income, equity, commodity and currency.

• Risks unique to derivative instruments
• Advantages and limitations of each product type
• Particular types of derivatives uses and rationales
• Decision points regarding over-the counter versus exchange-traded instruments

Derivative Product Comparisons: Mini- Case Studies
Looks at specific product comparisons in the context of mini case studies. Emphasis on yield curve structure, embedded derivatives and option-adjusted spreads and demonstrate how to examine international parity conditions, default risk metrics and yield enhancement techniques such as cash equitization.

Mini-case study examples include:

• Eurodollar futures versus forward rate agreements
• U.S. treasury futures versus interest rate caps/collars
• foreign currency forwards versus options
• credit derivatives
• total return swaps versus index options

Valuation: Understanding the Numbers
Derivative instrument valuation is a fundamental part of risk management. This module introduces some of the more commonly accepted pricing models and problems that arise when bad or inappropriate models are used.

• Derivatives pricing
• Impact of FAS 123R on valuation of stock options
• Influence of FAS 133 on derivative instrument valuation
• Data integrity
• Comparability issues
• Model risk and its importance
• Challenges in valuing derivative instruments
• Embedded derivatives- impact on valuation of hedge fund or private equity investments

Risk Management Techniques: Deciphering the Choices
There are numerous ways to measure realized loss or to estimate future expected losses. This module introduces commonly accepted techniques and their costs and benefits.

• Stress testing, uses and limitations
• Value at Risk variations and limitations
• Monte Carlo simulation and other "what if" methodologies?
• Risk Budgeting, and the asset-liability management process
• Use of multiple methods

	CTP/CCM Recertification Credits Financial Risk is approved for up to 11 CTP/CCM recertification credits. Credit is earned at the rate of one credit per 50 minutes of treasury/cash management or finance-related session time, including questions and answers.
	CPE Credit The Association for Financial Professionals is registered with the National Association of State Boards of Accountancy (NASBA), as a sponsor of continuing education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Eligible for up to 11 CPE Credits Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN 37219-2417. Web site: www.nasba.org

For more information regarding administrative policies, including submitting a complaint, please contact  AFP at 301.907.2862 or by email at AFP@AFPonline.org.