FIN625 Handouts Lectures 1-45

TABLE OF CONTENTS · Lec# · Topic · Page#

CREDIT ADMINISTRATION, MEASUREMENT AND MONITORING PROCESS .........14

ESTABLISHING AN APPROPRIATE CREDIT RISK ENVIRONMENT..............................17

ESTABLISHING AN APPROPRIATE CREDIT RISK ENVIRONMENT (CONT.) ...............19

CREDIT ADMINISTRATION, MEASUREMENT & MONITORING PROCESS................21

CREDIT ADMINISTRATION, MEASUREMENT & MONITORING PROCESS (CONT.) 24

CREDIT ADMINISTRATION, MEASUREMENT & MONITORING PROCESS (CONT.) .26

MARKET AND LIQUIDITY SENSITIVE CREDIT EXPOSURES...........................................29

BASIC SITUATION OF CREDIT APPROVAL PROCESS ..........................................................31

BASIC SITUATION OF CREDIT APPROVAL PROCESS (CONT.)............................................34

OBJECT OF REVIEW AND EXPOSURE MANAGEMENT......................................................36

DATA COLLECTION............................................................................................................................38

CREDIT REVIEW AND VALUATION OF COLLATERAL ......................................................40

CREDIT REVIEW AND VALUATION OF COLLATERAL (CONT.)........................................42

EXPOSURE ASSESSMENT..................................................................................................................45

CREDIT DECISION-MAKING STRUCTURE ...............................................................................47

RISK WEIGHTS FOR NON-CENTRAL GOVT. PUBLIC SECTOR ENTITIES (PSES).....49

COUNTERPARTY RISK WEIGHTINGS OF OTC DERIVATIVE..........................................52

QUALITATIVE DISCLOSURES.........................................................................................................54

CREDIT RISK MITIGATION IN THE STANDARDIZED APPROACH...............................56

OPERATIONAL REQUIREMENTS FOR GUARANTEES........................................................59

CREDIT RISK: THE INTERNAL RATINGS-BASED APPROACH.........................................62

OPERATIONAL REQUIREMENTS & TREATMENT OF CLEAN-UP CALLS...................65

KEY PRINCIPLES OF SUPERVISORY REVIEW .........................................................................68

SUPERVISORY TRANSPARENCY & ACCOUNTABILITY.......................................................71

THE ROLE OF FINANCIAL ADVISER & CREDIT RISK.........................................................74

ADVANCED TOPICS IN RISK MANAGEMENT ........................................................................87

MARKETING SYSTEMS IN LIFE INSURANCE ..........................................................................92 DEFINITION OF THE “INSURED” ..............................................................................................100

PERSONAL AUTO POLICY BASICS..............................................................................................103

AUTO INSURANCE AND SOCIETY .............................................................................................107

ISO COMMERCIAL PROPERTY PROGRAM ..............................................................................111

COMMERCIAL LIABILITY INSURANCE ....................................................................................116

CRIME INSURANCE AND SURETY BONDS.............................................................................122

THE NATURE AND IMPORTANCE OF CREDIT RISK & INSURANCE..........................126

FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH..............................................131

NON-LIFE INSURANCE....................................................................................................................135

RECAP ......................................................................................................................................................140

LECTURE – 01

Course Objectives

1. Environment and risks
2. Relationships between risk components
3. Decision makers and risk management
4. Systems engineering and risk management
5. Risks in simple, dynamic and systemic contexts
6. Insurance and legal implications for risk management
7. Defining context including organizational and behavioral considerations
8. Relationship between environment and risk identification and treatment
9. Generic and specific causes of risk
10. Qualitative and quantitative risk management techniques
11. Causation and mitigation techniques

Risk management is a key process often aligned with either project management or systems engineering. On the surface it appears to be a relatively simple process, but achieving effective risk management is often illusive. This course offers a comprehensive look at the risk management process, including tips to succeed and traps to avoid based upon a number of lessons learned from actual projects. Throughout the course, we explore how state of the art concepts can be applied to project risk management across a variety of industries to make it effective. The course provides practical, ready-to-use approaches using examples from actual programs, for risk planning, identifying and analyzing project risks, developing and implementing risk handling strategies, and monitoring progress in reducing risks to anticipated levels. You'll gain a solid foundation in the basic elements, strategies, and implications of derivatives, their products and terminology, as well as a better understanding of the effects of financial risk management on a firm's investment and financing decisions and on its overall profitability.

Learning Objectives

Concept of Risk

Understand the concept of risk management and how to use a variety of derivative financial strategies to manage risk. Learn how hedging can positively affect an organization’s risk exposure.

Risk Goals

1. Formulate and implement risk management strategies that are consistent with corporate goals.
2. Exploit hedging as a positive risk management tactic
3. Reduce the likelihood of financial distress
4. Use your organization's special skills and knowledge to optimize risk exposure

Course Contents

1. What is credit
2. Credit Score
3. Credit History
4. Credit Rating
5. Principles for the Management of Credit Risk
6. Individual Credit Lending
7. The role of professional Financial Advisor

Q8. The Role of the Financial Advisor, To Sell or Advice?

9. Role of Personal Financial advisor in the life of a common person.

Credit Risk & Credit Approval Process

1. Credit Approval Process
2. Process Steps Leading up to the Credit Review