This document provides an overview of risk management concepts across four modules: 1) Introduction to risk measurement, types of risks, and quantitative risk measurement techniques. 2) Risk avoidance strategies like hedging instruments and enterprise risk management frameworks. 3) Risk governance, the three lines of defense model, and managing stakeholder expectations. 4) Risk management in the insurance industry, including players, products, claims management, and the regulatory framework in India.

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

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

9. 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

10. • 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

11. 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

12. 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.

13. 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

14. 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

15. 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

16. 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.

17. • 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

18. 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

19. 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

20. 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.

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