Associate PRM™ Certificate

Section A: Risk Management, Risk and Return

• Definition of financial risk
• Role of the risk manager
• Risk terminology
• Types of risk: Market, Credit, Operational, Reputational, Legal, Business, Liquidity
• The balance between risk and reward
• Risk-adjusted returns
• Implementing a financial risk management program
• Hedge accounting
• Hedging at Merck
• Diversification
• Portfolio theory
• The efficient frontier
• The value of a call option
• Risk-adjusted returns

Section B: Governance and PRMIA Standards

• Importance of governance
• Role of the Board of Directors
• Typical financial risk management structure
• Basic risk management policies
• Importance and meaning of an Escalation Policy
• Role of external parties (external audit, regulators, “the market”)
• The ten core PRMIA Governance Principles
• How the PRMIA Governance Principles apply to the Board, the finance and accounting function, and the risk management department
• PRMIA Standards of Best Practice, Conduct and Ethics for Professional Risk Managers
• Positive role of risk management in the business process
• Basic operations of the PRMIA organization and practices

Section C: Financial Markets

• Money markets
• Bond markets
• Stock markets
• Foreign exchange markets
• Futures markets
• OTC markets
• Commodities markets
• Energy markets

Section D: Interest Rate Risk and Hedging

• Definition of interest rate risk
• Yields and bond prices
• The yield curve and bond prices
• Duration and convexity
• Risk of a single security
• Portfolio risk
• Principles of swaps
• Principles of options
• Caps and floors
• Swaptions
• Exotic options
• Financial engineering

Section E: Market Risk Management and ALM

• Notional amounts of exposure
• Option “Greeks”
• The concept of Value at Risk (VaR)
• Value at Risk and risk limits
• Determining Value at Risk measures
• When VaR doesn’t work
• Stress testing and extreme events
• Scenario planning
• Liquidity risk
• Role of the ALCO
• Funding gaps
• Duration gaps
• Liquidity risk in banks
• Funds Transfer Pricing (FTP)

Section F: Retail and Commercial Credit Risk Management

• Role of the credit officer
• Retail credit risk
• Credit scoring
• Default, default rates and loss rates
• The value of a customer
• Securitization and risk transfer
• Pricing risk
• Role of rating agencies
• Credit ratings
• Migration of credit ratings
• Internal rating scores and methods
• Basic financial measures in a loan risk assessment
• Loss Given Default (LGD)
• Counterparty credit risk
• Credit models
• Risk of a single credit
• Portfolio credit risk
• Credit VaR
• CreditMetrics
• MKMV models
• Actuarial and reduced-form models
• Overview of credit derivatives

Section G: Operational Risk Management and Performance Measures

• Operational loss
• Quantifying operational loss
• Link between operational and other risks
• Key risk indicator
• Key risk driver
• Differentiating between a key risk indicator and a key risk driver
• Framework for analysing operational risk
• Implementing an operational risk framework
• Implementing a scenario-based process for assessing and quantifying operational risks
• Assessing risks from new business processes, products or change management initiatives
• Mitigation and mitigation techniques
• Role of insurance in operational risk transfer
• Risk capital
• Core uses of risk capital
• Risk capital vs. regulatory capital
• RAROC
• Uses of RAROC in business decision making

Section H: Case Studies

• Metallgesellschaft
• Orange County
• Riggs Bank
• LTCM
• Continental / Penn Square
• Bankgesellschaft Berlin
• Credit Lyonnais
• NAB FX Options
• Barings Bank
• WorldCom
• Banker’s Trust
• Daiwa
• G30 Report and Recommendations
• Governance lessons
• Market risk lessons
• ALM lessons
• Market risk lessons
• Credit risk lessons
• Operational risk lessons
• Governance lessons