Auditing Risk Management and Basel II - MIS Training

The International Leader in Audit andInformation Security TrainingEARN30 CPE CREDITSAuditing RiskManagementand Basel II30th November - 3rd December 2009, LondonCourse Director David Bobker, DPHIL, MA, ACAUnderstand the Key Banking Risks, the Management and GovernanceRequirements Under Basel II and how they may be AuditedClarifythe role of internal audit vs that of risk managementUnderstandthe key new audit areas arising from Basel IILearnthe basics of credit, market and operational risk modelsGeta better understanding of what risk managementfunctions doPuttogether key elements of a Basel II and riskmanagement audit programmePrevious Basel II attendees:Media Partner:“Very informative: Happyto now have a deeperknowledge of Basel II.David used goodindustry examples”SAVE UP TO50% WITHIN HOUSETRAININGDetails insideDepfa Bank PLC“A provocative andchallenging overviewof Basel II, which setsout the issues facingthe auditor”Capital OneLONDONWeb mistieurope.com Email mis@mistieurope.com

Auditing Risk Managementand Basel IIUnderstand the Key Banking Risks, the Management and GovernanceRequirements Under Basel II and how they may be Audited30th November -3rd December 2009,LondonSeminar Focus & FeaturesBasel II has now been largely implemented in many countries, except for the approval and implementation of advanced models which willhappen mainly during 2008/2009. Internal audit departments are now busy planning their first audits in a Basel II environment and arefinding 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 inthe background previously. A major innovation is the requirement for banks to have an Internal Capital Adequacy Assessment processwhereby the board must, at least annually, self assess the solvency of the bank. This ICAAP is subject to rigorous review by banksupervisors under Pillar 2 and is required to be reviewed by internal audit. Secondly, since the advent of Basel I back in 1988, most bankshave now set up various types of risk management function staffed by risk management professionals carrying out a range of activities. Thishas 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 deliverexpectations.This four day course focuses on the main banking risks, the management and governance requirements under Basel II and how they may beaudited. The programme is designed to help internal auditors focus on the key areas where they may need to upgrade their technicalknowledge and possibly engage the services of external specialists so as to ensure they provide the necessary level of assurance to theboard of directors.Course Director David Bobker DPHIL, MA, ACAAfter completing a DPhil in mathematics at Oxford University, David worked as a manager in a small, diverse, banking and property companyin London. He left the company to train as a chartered accountant with Peat Marwick Mitchell (KPMG) specialising in the insurance industryand statistical auditing. He later moved to Touche Ross, where he provided regulatory compliance advice mainly to wholesale banks andbroker dealers.In 1989 David was seconded to the Building Societies Commission as a Supervisor. He had policy responsibility for capital adequacy whichincluded UK implementation of European capital adequacy rules and new rules on capital instruments for building societies. After leaving theCommission he moved into the internal audit profession at Alliance & Leicester where he was Head of Group Audit and Group ComplianceOfficer for 7 years. In order to provide a more soundly based internal audit service he developed specialist audit software to ensure fullyconcise, 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 onimplementing 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 appropriatecorporate 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 forbanking industry implementing Basel II), corporate governance and compliance.In-House TrainingSAVE UP TO50% WITH INHOUSESave Up To 50% When You RunThis course In-houseIn-house tailored training will enableyou & your colleagues to makesignificant savings as we charge perday & not per participant so the costremains the same regardless of howmany people attend. We can offer anyof our public courses or tailor them toyour requirements. Training isavailable in all areas of Internal Audit,IT Audit, and IT SecurityIf you have 6 or more colleagues whowould be interested in one of ourcourses and you would like to makesignificant savings, contact us now;• What are your training objectives?• How many people require thetraining?• When would you like to run thetraining?• What level of experience do youand your colleagues have?• We will then email you a detailedproposal which addresses yourunique needs.You will have complete control of thetraining content and decide when it isrun. We guarantee that we will be ableto cater for all your business needs.More Great Reasons to Chooseour In-house Training:• Save money over public seminarfees• Save money on travel &accommodation• Save time on travel as the instructorwill travel to you. Furthermore, thetraining can be held at the mostconvenient time for you.• Tailor the course content; ensurethe relevance of the seminar foryour colleagues. You can tailor thestructure & methodology of yourseminar or customise the seminarTRAININGto meet theexpertise levels of the participants.• Bring the best in the business;Instructors are hands-on, expertpractitioners who are your subjectmatter consultants when they arenot training.• Gain CPE points & certificates forthe number of training hours.Email Guy Cooper atgcooper@mistieurope.comor call+44 (0) 20 7779 8975

Day OneIntroduction and Course ObjectivesOverview• 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 ofinterested parties:• Internal audit• Risk management functions• Internal control units• Credit review functions• Compliance functions• Risk and business knowledge and auditcompetenceThe main banking risks and theirmanagement• A typical balance sheet• Main banking activities – how banks makemoney• Credit risk• Operational risk• Interest rate risk• Liquidity risk• Business and strategic risk• Political risk• Market riskFundamentals of quantitativeanalysis• 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 testingDay TwoOperational risk management I• Types of operational risk• Operational risk management responsibilities• Basel II requirements• Qualitative requirements for TSA• Sound practices for the management ofoperational risk• The role of the operational risk department• Operational risk policy• Operational risk reporting• The audit of operational risk managementCase Study: Barings bankOperational 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 specialistsCredit Risk Part I• Overview of credit risk and credit riskmanagement• Retail unsecured lending – credit scoring• Mortgage lending• Corporate lending• Public credit ratings – use and limitations• Trade finance• Commercial lending – SME sector• Collateral and guarantees• Counterpart credit risk and settlement risk• Credit derivatives and securitisation• BIS document - principles for management ofcredit risk• Credit risk management – roles andresponsibilities• Auditing credit risk managementCase Study: Sub-prime crisis 2007Day ThreeCredit Risk Part II – Modelling andthe Internal Ratings Basis• The three elements PD, LGD, EAD• PD modelling• 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 specialistsStructural 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 managementCase Study: US Savings and Loans crisis ofthe 1980’sLiquidity 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 managementCase Study: Northern RockDay FourCapital 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 – contagionrisk• Auditing the ICAAPCorporate governance, internal auditand 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 corporategovernance• The role of internal audit compared to the role ofrisk management• The Basel Principles of internal audit in banks• Auditing risk management functionsMarket 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 riskmanagement models• Middle office and market risk governance• Scenario analysis and stress testing• Auditing market risk managementCase Study: MetallgesellschaftPrerequisiteBasic understanding ofbanking activities (wholesale,commercial and retaillending and treasuryoperations)Learning levelBasicFeeGBP £2,495Earn 30CPE Credits© MIS Training 2009

Auditing Risk Management and Basel IIUnderstand the Key Banking Risks, the Management and GovernanceRequirements Under Basel II and how they may be AuditedWhen registering for this event please quote reference WEBKey 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 auditprogrammeWhy should you attend?• MIS Training Institute is the global leader in audit and infosecuritytraining, with over 30 years experience and having trained over200,000 delegates• Instructors/speakers are the most reputable in the industry• Group sizes are restricted to ensure optimum contact time with thefacilitator• Courses are constantly reviewed and revamped to meet the latestlegislative and market challenges• Gain CPE points towards your professional certification30th November - 3rd December 2009, LondonPLEASE SEND ME INFORMATION ABOUT RUNNING THIS COURSE IN-HOUSE Auditing Risk Management and Basel II(please photocopy form for additional delegates) 30th November - 3rd December 2009, London (MT031107)GBP £2,495 £+ VAT @ 15% £Grand Total £Payment InformationYou can pay by debit/credit card online at www.mistieurope.com or call+44 (0)20 7779 8944 Cheque enclosed (payable to MIS Training) Please invoice my company PO#Please note that in completing this booking you undertake to adhere to thecancellation and payment terms listed belowSignatureDateApproving ManagerRegistration Information(fees must be paid in advance of the event)*Discounts: Please call to enquireabout corporate discounts.Discounts can not be used inconjunction with each other.PositionCancellation Policy:Please ensure you have read this carefully before submitting your registration] MIS Trainingoperates a 20 working day cancellation policy. Any cancellations received after 20 days or anydelegate that does not attend will be subject to full payment.You may transfer to another course/conference for a transfer fee of 25% of the initial booking feeplus the difference between the value of the course/conference you are transferred to. This willbe invoiced or refunded. Please note that the replacement course/conference must take placewithin 6 months of the initial application.Alternatively you may send another colleague to the initial booked course/conference withoutincurring any additional fees.A full refund less an administration fee of £100 will be given forcancellation requests received up to 20 working days before the event. Cancellations must bemade in writing and reach the MIS office before the 20 working days deadline.5 easy ways to registerTel: +44 (0)20 7779 8944Fax completed form to: +44 (0)20 7779 8293Email: mis@mistieurope.com Web: www.mistieurope.comPost completed form to: Carlos Doughty, MIS Training, Nestor House,Playhouse Yard, London EC4V 5EX UKCustomer InformationTitle First name SurnameTitle/PositionOrganisationE-Mail Address (Required)AddressCountryPostcodeTelephoneFaxVAT Number (If you have one)The information you provide will be safeguarded by the Euromoney Institutional Investor PLCgroup whose subsidiaries may use it to keep you informed of relevant products and services.We occasionally allow reputable companies outside the Euromoney Institutional Investor PLCgroup to contact you with details of products that may be of interest to you. As an internationalgroup we may transfer your data on a global basis for the purposes indicated above. If youobject to contact by telephone fax or email please tick the relevant box. If you do notwant us to share your information with other reputable companies please tick this box Please send me information on In House TrainingAccommodation:All training venues will be confirmed 3-4 weeks prior to the course start date. MIS TrainingInstitute has negotiated special accommodation rates in 4 star hotels in central London (Zone1) for UK courses.VAT:All delegates attending are liable to pay VAT. After the event organisations registered for VAT inthe UK may reclaim the tax.Delegates from outside the UK but within the European Community may also be able to reclaimthe VAT. Organisations outside the UK should check with their excise authority as to whichdomestic fiscal regulations apply. High Yield/No-RiskEARN30 CPE CREDITSWeb www.mistieurope.comEmail mis@mistieurope.com