Dr. Shraddha Shukla
Ph.D, SET, M.Phil, M.Com,P.G.DFM
IQAC,B.B.I,BAF & M.Com Co-ordinator
Shailendra Degree College

Introduction, Risk Measurement and
Control
Introduction, Risk Measurement and Control
Definition, Risk Process, Risk Organization, Key Risks
–Interest, Market, Credit, Currency, Liquidity, Legal,
Operational Risk Management V/s Risk
Measurement – Managing Risk, Diversification,
Investment Strategies and Introduction to
Quantitative Risk Measurement and its Limitations
Principals of Risk - Alpha, Beta, R squared, Standard
Deviation, Risk Exposure Analysis, Risk
Immunization, Risk and Summary Measures –
Simulation Method, Duration Analysis, Linear and
other Statistical Techniques for Internal Control

2 Risk Avoidance and ERM
• a) Risk Hedging Instruments and Mechanism:
Forwards, Futures, Options, Swaps and Arbitrage
Techniques, Risk Return Trade off, Markowitz Risk
Return Model, Arbitrage Theory, System Audit
Significance in Risk Mitigation
• b) Enterprise Risk Management: Risk
Management V/s Enterprise Risk Management,
Integrated Enterprise Risk Management, ERM
Framework, ERM Process, ERM Matrix, SWOT
Analysis, Sample Risk Register

3 Risk Governance and Assurance
• a)Risk Governance: Importance and Scope of Risk
Governance, Risk and Three Lines of Defense,
Risk Management and Corporate Governance
• b) Risk Assurance: Purpose and Sources of Risk
Assurance, Nature of Risk Assurance, Reports and
Challenges of Risk
• c) Risk and Stakeholders Expectations: Identifying
the Range of Stakeholders and Responding to
Stakeholders Expectations

4.Risk Management in Insurance
• a) Insurance Industry: Global Perspective, Regulatory
Framework in India, IRDA - Reforms, Powers, Functions
and Duties. Role and Importance of Actuary
• b) Players of Insurance Business: Life and Non- Life
Insurance, Reinsurance, Bancassurance, Alternative
Risk Trance, Insurance Securitization, Pricing of
Insurance products, Expected Claim Costs, Risk
Classification
• c) Claim Management: General Guidelines, Life
Insurance, Maturity, Death, Fire, Marine, Motor
Insurance and Calculation of Discounted Expected
Claim Cost and Fair Premium

Question Paper Pattern (Practical
Courses)
• Q-1 Objective Questions 15 Marks
• A. Sub Questions to be asked 10 and to be answered any 08 8 Marks
• B. Sub Questions to be asked 10 and to be answered any 07
• (*Multiple choice / True or False / Match the columns/Fill in the blanks) 7 Marks
• Q-2 - Full Length Practical Question 15 Marks
OR
• Q.2.Full Length Practical Question 15 Marks
• Q-3 - Full Length Practical Question 15 Marks
OR
• Q.3.Full Length Practical Question 15 Marks
• Q-4 - Full Length Practical Question 15 Marks
OR
• Q.4.Full Length Practical Question 15 Marks
• Q-5 A) Practical questions 08 Marks
• B) Practical questions 07 Marks
OR
• Q.5.Short Notes To be asked 05 To be answered 03 15 Marks

Module I
• Risk process-Identification, Analysis, Evaluation, Treatment,
Monitoring
• Types of risk-Market, Liquidity, Exchange rate, operational,
credit, systematic, unsystematic, political, commercial,
inflation
• Exchange Rate risk-
a)Transaction exposure-conversion of foreign exchange at the
date of payment
b)Translation Exposure-Converting values of assets & liabilities
denominated in a foreign currency into the domestic currency
c)Operation exposure-future cash flows of a firm will get
affected due to fluctuation in value of foreign currency

• Risk reduction measures by stock exchanges:
a)Capital adequacy requirement
b)Trading and exposure limits
c)Margin requirement
Political Risk, Technology risk, Inflation risk

Diversification
• Meaning-Refers to constructing portfolio
comprising of various group of assets
• Advantages-Reduction of risk, Enhancement of
returns
• Limitations-Systematic risk remains unchanged,
Increase complexity, Increases the cost of
managing the portfolio
• Factors to be considered while diversifying- Cost.,
Returns, Complexity, Investment objectives

• Investment Strategies-Increasing number of sectors and stocks, Use of fixed
income securities, Inclusion of derivatives in portfolio, Alternative investment
strategies
• Quantitative Risk Management-It is analysis of the highest priority risks during
which a numerical or quantitative rating is assigned in order to develop a
probabilistic analysis.
• Methods of Quantitative risk measurement-
Tool-1)Sensitivity analysis-refers to change in output with change in one or more input
analysis.
Tool-2)Expected monetary value(EMV) analysis-it is calculated by multiplying the
likelihood by the cost impact to obtain an expected value for each risk
Tool-3)Decision tree analysis-flow diagram
Tool-4)Tornado diagrams-it is a special type of Bar chart, where the data catergories
are listed vertically instead of the standard horizontal presentation
Tool-5)Modeling and simulation: It is Monte Carlo analysis which is normally
calculated by computer by analyzing many scenarios for the project schedule and
calculating impact of particular risk events.
Tool-6)Expert judgement

ALM in Banks
• 1) Managing interest rate risk
• 2)Effective ALM policy
• 3)Linking ALM with future risk management
policy
Basel Norms in Banking Industry
a)Minimum capital requirements
b)Supervisory review
c)Market discipline

Risk and summary measures
• 1)Simulation method-computerised mathematical
technique that allows people to account for risk in
quantitative analysis and decision making.
• 2)Duration analysis-measure of time
• 3)Macaulay Duration- It is weighted average term to
maturity of the cash flows from a bond.
• 4)Modified duration: it is calculated as measurable
change in the value of a security in response to a
change in interest rates.
• 5)Rupee Duration: It is measure of percentage change
in price, for a percentage change in yield.

Module II
• Derivatives-Forwards, Futures, Options, Swaps
• Arbitrage techniques-Simultaneous buying &
Selling of securities, currency or commodities
in different markets
• Markowitz risk and return model-It is theory
an how risk- averse investors can construct
portfolios to optimize or maximize expected
return based on a given level of market

System audit
• Meaning-Assessing the effectiveness of a
company’s internal controls, importance of
system audit in risk mitigation
• Distinguish between risk management and
enterprise risk management
• ERM-meaning, framework, process, matrix,
components
• Identify Risk through SWOT analysis
• Risk Register

Module III
• Risk Governance-rules convention processes
and mechanism by which decisions about risks
are taken and implemented
• Corporate governance-it is process of
supervision and control intended to ensure
that the company’s management acts in
accordance with interests of shareholders.
• Benefits of corporate governance

Three line Defence model
• It is a active way to enhance communication on
risk management and control by clarifying
essential roles and duties.
• First line of defence-functions that own and
manage risk-operational managers own and
manage risk
• Second line of defence-functions that oversee or
specialize in risk management compliance. It is
function to monitor, to control
• Third line of defence-Functions that provide
independent assurance, above all internal audit.

• Risk assurance-It is professional service
provided by Chartered or Certified Public
Accountants or Chartered Certified
Accountant.
• Sources of risk assurance-First, second, third
line
• Risk assurance report-written report,
conclusions(Positive or negative conclusion)
• Reports and challenges of risk

Risk and stakeholders expectation
• Stakeholders-individual, group, or
organisation who may be affected by or
perceive itself to be affected by a decision
activity, or output of a project
• Types-Internal or external

Module IV-Risk management in
Insurance
• Insurance industry, Impact of globlisation
• Opportunities
• Essentials to meet the challenges due to globlisation
• Regulatory framework in India-IRDA, Reforms
• Duties, powers and functions of IRDAI
• Role and importance of Actuary-calculating cost, role in
pension
• Insurance –Types
• Reinsurance
• Bancassurance

Alternative risk transfer
• Risk transfer through alternative products
• Risk transfer through alternative carriers
• Insurance securitization-it is transferring of
underwriting risks to the capital markets
through the creation and issuance of financial
securities.

Claim management
• Claims management, handling
• LIC, Fire insurance, Marine insurance, moter-
insurance