AUDITING RISK MANAGEMENT AND BASEL II - MIS Training

The International Leader
in Audit and Information
Security Training
EARN 30 CPE CREDITS
SAVE
UP TO 50%
WITH
IN HOUSE
TRAINING
see the inside
page for more
information
AUDITING RISK
MANAGEMENT
AND BASEL II
Understand the Key Banking Risks, the Management and Governance
Requirements Under Basel II and how they may be Audited
18th - 21st August 2008,
Prague
CZECH REPUBLIC
Course Director
David Bobker, DPHIL, MA, ACA
Clarify the role of internal audit vs that of risk
management
Understand the key new audit areas arising from Basel II
Learn the basics of credit, market and operational risk
models
Get a better understanding of what risk management
functions do
Put together key elements of a Basel II and risk
management audit programme
WWW.MISTIEUROPE.COM/EUROPE
MIS@MISTIEUROPE.COM

SEMINAR
FOCUS
AND
FEATURES
Auditing Risk Management
and Basel II
18th - 21st August 2008,
Prague
Basel II has now been largely implemented in many countries, except for the
approval and implementation of advanced models which will happen mainly
during 2008/2009. Internal audit departments are now busy planning their
first audits in a Basel 2 environment and are finding much has changed from
the traditional approaches.
The first thing is that Basel II has brought a significant and explicit focus on
risk management and corporate governance which was more in the
background previously. A major innovation is the requirement for banks to
have an Internal Capital Adequacy Assessment process whereby the board
must, at least annually, self assess the solvency of the bank. This ICAAP is
subject to rigorous review by bank supervisors under Pillar 2 and is required
to be reviewed by internal audit. Secondly, since the advent of Basel I back in
1988, most banks have now set up various types of risk management
function staffed by risk management professionals carrying out a range of
activities. This has put a focus on the role of internal audit in the new world
and whether it is able to carry out its new responsibilities and deliver
expectations.
This four day course focuses on the main banking risks, the management
and governance requirements under Basel II and how they may be audited.
The programme is designed to help internal auditors focus on the key areas
where they may need to upgrade their technical knowledge and possibly
engage the services of external specialists so as to ensure they provide the
necessary level of assurance to the board of directors.
COURSE DIRECTOR
DAVID BOBKER DPHIL, MA, ACA
After completing a DPhil in mathematics at Oxford University,
David worked as a manager in a small, diverse, banking and
property company in London. He left the company to train as a
chartered accountant with Peat Marwick Mitchell (KPMG)
specialising in the insurance industry and statistical auditing.
He later moved to Touche Ross, where he provided regulatory
compliance advice mainly to wholesale banks and broker dealers.
In 1989 David was seconded to the Building Societies
Commission as a Supervisor. He had policy responsibility for
capital adequacy which included UK implementation of European
capital adequacy rules and new rules on capital instruments for
building societies. After leaving the Commission he moved into the
internal audit profession at Alliance & Leicester where he was
Head of Group Audit and Group Compliance Officer for 7 years.
In order to provide a more soundly based internal audit service he
developed specialist audit software to ensure fully concise, logical
analysis underpinned all internal audits.
In 1998 he moved to Norwich Union as Head of Group Internal
Audit. His responsibilities during those years included pioneering
work on implementing corporate governance arrangements and
“enterprise risk management”, what became later Turnbull
compliant systems. Involving systems of risk identification and
assessment, effectiveness of controls and compliance processes
together with appropriate corporate reporting systems for the
board and audit committee.
David set up Real Assurance in 2001 helping clients move
towards best practice in quantified risk management systems
(especially for banking industry implementing Basel 2), corporate
governance and compliance.
Prerequisites
Basic understanding of banking activities (wholesale,
commercial and retail lending and treasury operations);
Learning Level
Basic
Fee
GBP £2,195
IN-HOUSE TRAINING
Save up to 50% on training when you run
this course in-house
In-house tailored training will enable you & your colleagues to
make significant savings as we charge per day & not per
participant so the cost remains the same regardless of how
many people attend. We can offer any of our public courses or
tailor them to your requirements. Training is available in all areas
of Internal Audit, IT Audit, and IT Security
If you have 6 or more colleagues who would be interested in one
of our courses and you would like to make significant savings,
contact us now;
• What are your training objectives?
• How many people require the training?
• When would you like to run the training?
• What level of experience do you and your colleagues have?
• We will then email you a detailed proposal which addresses
your unique needs.
You will have complete control of the training content and decide
when it is run. We guarantee that we will be able to cater for all
your business needs.
Email Guy Cooper at gcooper@mistieurope.com or call
+44 (0) 20 7779 8975 now
More Great Reasons to Choose our In-house Training:
• Save money over public seminar fees
• Save money on travel & accommodation
• Save time on travel as the instructor will travel to you.
Furthermore, the training can be held at the most convenient
time for you.
• Tailor the course content; ensure the relevance of the seminar
for your colleagues. You can tailor the structure & methodology
of your seminar or customise the seminar to meet the
expertise levels of the participants.
• Bring the best in the business; Instructors are hands-on, expert
practitioners who are your subject matter consultants when
they are not training.
• Gain CPE points & certificates for the number of training hours.
EARN 30 CPEs

AGENDA
DAY ONE
Introduction and Course Objectives
Overview
■ Overview of the Basel II Accord
■ Centrality of ICAAP
■ Risk management and governance
■ Risk management departments
■ Internal audit and governance
■ How to sort out roles and
responsibilities of interested parties:
■ Internal audit
■ Risk management functions
■ Internal control units
■ Credit review functions
■ Compliance functions
■ Risk and business knowledge and
audit competence
The main banking risks and their
management
■ A typical balance sheet
■ Main banking activities – how banks
make money
■ Credit risk
■ Operational risk
■ Interest rate risk
■ Liquidity risk
■ Business and strategic risk
■ Political risk
■ Market risk
Fundamentals of quantitative analysis
■ The notion of risk
■ Probability distributions
■ Correlation and causality
■ Modelling
■ Value At Risk
■ Analysis of the loss curve
■ Approaches to constructing loss
curves
■ Data collection and statistical models
■ Back testing
■ Risk appetite and economic capital
■ The meaning and importance of
stress testing
DAY TWO
Operational risk management I
■ Types of operational risk
■ Operational risk management
responsibilities
■ Basel II requirements
■ Qualitative requirements for TSA
■ Sound practices for the management
of operational risk
■ The role of the operational risk
department
■ Operational risk policy
■ Operational risk reporting
■ The audit of operational risk
management
Case Study: Barings bank
Operational Risk II - The AMA
■ The AMA soundness standard
■ The four elements
■ Business environment
■ Internal control evaluation
■ Internal Data
■ External Data
■ Scenario analysis and stress testing
■ Correlation between loss events
■ Problems and issues with AMA
■ Internal audit of the AMA and use of
specialists
Credit Risk Part I
■ Overview of credit risk and credit risk
management
■ Retail unsecured lending – credit
scoring
■ Mortgage lending
■ Corporate lending
■ Public credit ratings – use and
limitations
■ Trade finance
■ Commercial lending – SME sector
■ Collateral and guarantees
■ Counterparty credit risk and
settlement risk
■ Credit derivatives and securitization
■ BIS document - principles for
management of credit risk
■ Credit risk management – roles and
responsibilities
■ Auditing credit risk management
Case Study: Sub-prime crisis 2007
DAY THREE
Credit Risk Part II – Modelling and the
Internal Ratings Basis
■ The three elements PD, LGD, EAD
■ PD modeling
■ Logit/probit models
■ The Merton equity model
■ Z-scoring
■ Loan portfolio analysis – Monte Carlo
simulation
■ Economic capital for credit risk
■ The internal ratings basis in Basel II
■ Pre-conditions for use of IRB
■ Stress testing credit risk – PD
migration, economic modelling
■ Auditing credit risk models – use of
specialists
Structural interest rate risk
■ Interest rate instruments – bonds,
swaps
■ Banking book and trading book
■ Fundamentals of interest rate analysis
– pricing, duration, convexity
■ The spot curve and the yield curve
■ Gap analysis and risk assessment
■ Parallel shifts and twists
■ A simple Monte Carlo model
■ The Basel II stress test – 2% parallel
shift
■ More sophisticated “Brownian
motion” models
■ Interest rate risk management – the
ALCO
■ The Basel II “Principles” paper
■ Capital assessment under Pillar 2
■ The audit of interest rate risk
management
Case Study: US Savings and Loans
crisis of the 1980’s
Liquidity risk
■ What is liquidity risk
■ Bank runs – Northern Rock
■ Should banks provide capital under
Pillar 2?
■ Cash flow forecasting
■ Scenario analysis and stress testing
■ Mitigation – liquidity, committed
facilities
■ Basel paper on liquidity risk
management
■ Internal audit of liquidity risk
management
Case Study: Northern Rock
DAY FOUR
Capital Assessment Process
■ Pillar 2
■ Basel 2 principles for capital
assessment
■ CEBS guidance
■ Supervisory assessment of capital
■ FSA proforma
■ Stress testing
■ Regulators’ concern with group risk –
contagion risk
■ Auditing the ICAAP
Corporate governance, internal audit
and risk management
■ Corporate governance in banks –
UK, Europe, OECD, Basel
■ Group structures and multi-national
banks
■ Audit Committees and Risk
Committees
■ Risk management a key element of
corporate governance
■ The role of internal audit compared to
the role of risk management
■ The Basel Principles of internal audit
in banks
■ Auditing risk management functions
Market Risk
■ Types of instruments – swaps,
options, forwards, futures
■ Types of market – OTC, “pit”,
electronic
■ Margined transactions
■ Trading and hedging
■ Payoff diagrams
■ Fundamentals of market risk
■ Derivatives, greeks and Black
Scholes
■ Market risk capital and VAR models
■ Simple models
■ Sophisticated models
■ Difference between pricing models
and risk management models
■ Middle office and market risk
governance
■ Scenario analysis and stress testing
■ Auditing market risk management
Case Study: Metallgesellschaft
© MIS Training 2008

AUDITING RISK MANAGEMENT AND BASEL II
Understand the Key Banking Risks, the Management and Governance Requirements Under
Basel II and how they may be Audited
30 CPES
Key topic areas:
■ Clarify the role of internal audit vs that
of risk management
■ Understand the key new audit areas
arising from Basel II
■ Learn the basics of credit, market
and operational risk models
■ Get a better understanding of what
risk management functions do
■ Put together key elements of a Basel
II and risk management audit
programme
Why should you attend?
Please quote ref WEB when registering for this course
I would like to receive information about running this course in-house
Auditing Risk Management
and Basel II
(please photocopy form for additional
delegates)
18th - 21st August 2008, Prague
(MT2448)
£2,195 £
Grand Total £
*Discounts: Please contact MIS to find out about
corporate discounts. Discounts can not be used in
conjunction with each other.
FEES MUST BE PAID IN ADVANCE OF
THE EVENT
Customer Information
Title First name Surname
Title/Position
Organisation
E-Mail Address (Required)
Address
Country
Postcode
Telephone
Fax
The information you provide will be safeguarded by the Euromoney Institutional Investor PLC group whose subsidiaries
may use it to keep you informed of relevant products and services. We occasionally allow reputable companies outside
the Euromoney Institutional Investor PLC group to contact you with details of products that may be of interest to you. As
an international group we may transfer your data on a global basis for the purposes indicated above. If you object to
contact by telephone , fax , or email please tick the relevant box. If you do not want us to share your information
with other reputable companies please tick this box .
Payment Information
YOU CAN NOW PAY ONLINE AT www.mistieurope.com
Cheque enclosed (payable to MIS Training) Please invoice my company PO#
Please debit my credit card AMEX VISA MasterCard
Card Number
Expiry
Cardholders name
Verification Code
Please include billing address if different from address given
Please note that in completing this booking you undertake to adhere to the cancellation and
payment terms listed below
Signature
Approving Manager
5 easy ways to register
Tel: +44 (0)20 7779 8944
Fax completed form to:
+44 (0)20 7779 8293
Email: mis@mistieurope.com
Web: www.mistieurope.com
Post completed form to:
Carlos Doughty,
MIS Training, Nestor House,
Playhouse Yard,
London
EC4V 5EX UK
Date
Position
Please send me information on:
■
■
■
■
MIS Training is the global
leader in internal audit training,
having trained over 200,000
delegates
Course Instructors are the
most reputable in the industry
We have an impressive client
list including AIB, Caja Madrid,
De Nederlandsche Bank, Dexia
Bank, European Central Bank,
& Novartis to name a few
Earn CPE points - which can be
used to qualify for an IRM,
ICAEW, CIMA, ACCA, IIA or
PRMIA
In House Training
Auditing Operational Risk,
4th - 5th August 2008, London
Auditing The Credit Department,
6th - 8th August 2008, London
Understanding and Auditing Derivatives,
8th - 11th September 2008, London
Registration Information
(fees must be paid in advance of the
event)
Accommodation
MIS Training has negotiated special
accommodation rates for hotels in Prague.
For further information please email
mis@mistieurope.com or call + (0) 20 7779
8944. If you have any other queries please visit
www.mistieurope.com/FAQs.
Cancellation Policy
Should a delegate be unable to attend, a
substitute may attend in his or her place.
Cancellations received within 21 working days
of the event are liable for the full seminar fee. If
full payment has been received you are eligible
for a 75% reduction on the next run of the
seminar. This discount will be valid for one
year only. MIS reserves the right to change or
cancel programmes due to unforeseen
circumstances.