文档介绍：Chapter 18
An introduction to risk management
And derivatives
Learning objectives
Understand the nature and Option contracts
Swap contracts
Summary
The risk management process
Effective management of risk exposures requires a structured risk management process
Although the range of risks varies by organisation, one such model is:
identify operational and financial risk exposures
analyse the impact of the risk exposures
assess the attitude of the organisation to each identified risk exposure
select appropriate risk management strategies and products
establish related risk and product controls
implement the risk management strategy
monitor, report, review and audit
(cont.)
The risk management process (cont.)
Identify operational and financial risk exposures
Requires full understanding of the business, including operations, personnel, competitors, regulators, legislative requirements, stakeholders, cash flows and balance sheet structure
Also need to understand interrelationships and causal links between the above categories
Analyse the impact of the risk exposures
A business impact analysis is used to document each risk exposure and measure the operational and financial impacts should the risk event occur
Need to consider both quantitative and qualitative risks
(cont.)
The risk management process (cont.)
Assess the attitude of the organisation to each identified risk exposure
Not all risks will be mitigated or removed
The risks to be avoided, controlled, transferred or retained should be documented
Select appropriate risk management strategies and products
An integrated process to analyse the risk management options available
Generally, several risk management strategies available, the choice between them to be subject to cost–benefit analysis
All risk management processes and strategies should be periodically audited
(cont.)
The risk management process (cont.)
Establish related risk and product controls
E