Ideal candidates are senior professionals in a field related to risk management, have good communication skills, enjoy networking and are looking to play a leadership role in providing a forum for setting a higher standard for risk professionals. The Regional Director is responsible for the overall operations of the chapter, and is supported by the Steering Committee and members who volunteer for the chapter in various ways.
Additional details about the Regional Director role above can be found within the Regional Chapter Bylaws document by clicking here or cutting and pasting the entire link below into your web browser.
http://www.prmia.org/Weblogs/General/PRMIA_docs/PRMIA Regional Chapter Bylaws - 12_21_11.pdf
If you are interested in applying for the Regional Director position, please simply submit the answers to the following questions to kristin.lucas@prmia.org by 03 May, 2012.
1. Provide a short bio of your background - including work experience and education.
2. What is your interest in PRMIA and why does the role of Regional Director interest you?
3. How can you contribute to this committee/role? What are your strengths? Give examples.
4. How much time do you have to commit to this role?
5. Are you a PRM holder?
6. Can your employer offer a space for PRMIA Meetings (University auditorium, boardroom, etc)?
Modelling systemic liquidity risk with feedback effects in the UK banking sector
Gary van Vuuren
A liquidity risk stress-testing model, which has been tested in the Dutch market and which considers feedback shocks induced by market participants, is adapted and calibrated for generic use and then applied to UK bank data. Because the model is flexible and adaptable, it permits the robust investigation of different bank reactions to stressed market conditions, including buffer restoration, leverage targeting, the effect of severely stressed haircuts and systemic risk increases (through reputation degradation and enhanced contagion by other banks).
Value optimisation in a regulatory constrained regime - A new look at risk vs return optimisation
Peter Miu, Bogie Ozdemir and Michael Giesinger
Although Basel II made Pillar I's regulatory capital (RC) more risk-sensitive and provides a much better estimation of risk relative to Basel I, it still comes short in many areas-most notably in concentration and diversification risk which is essential for value optimisation. Owing to its ability to more accurately capture concentration and diversification, its larger coverage and overall better accuracy, Economic Capital should be the primary metric in risk return optimisation for the entire bank. RC, on the other hand, is a regulatory reality and a very strong constraint which is likely to be stronger with the implementation of Basel III. This paper examines value optimisation in a regulatory constrained regime.
Credit BuVaR: Asymmetric spread VaR with default
Max Wong
A tradeable credit instrument shows two forms of credit risk - a continuous spread risk and a discontinuous default risk. The Basel market risk framework requires the two risks to be modelled separately for the purpose of regulatory capital but this gives rise to issues of risk aggregation. The author proposes a risk metric called credit bubble VaR (Cr. buVaR) that combines these dual risks under a common historical simulation value-at-risk (VaR) approach. By using a single model, Cr. buVaR bypasses the problem of risk aggregation. Credit risks can then be aggregated with market risk in a diversifiable manner. Cr. buVaR is also found to be forward-looking with respect to issuer credit default and is not procyclical. The model is motivated by evidence from the 2008 crisis that issuer defaults and spread movements exhibit asymmetry, and that defaults are always preceded by rapid spread widening. The method involves scaling the positive side of the return distribution of credit spreads in proportion to current spread levels. By drawing inferences from studies on the "credit spread puzzle", it is deduced that the incremental loss of Cr. buVaR over spread VaR is due to default risk.
A value-at-risk approach to commercial real estate portfolio stress testing at US community banks
John Hall, David Kern, Timothy Yeager, Tom King and Kevin Lee
The December 2006 federal regulatory guidance on commercial real estate (CRE) requires banks with significant concentrations in CRE lending to employ appropriate risk-management techniques to measure and manage the risk. Using vector auto-regression techniques on historical CRE foreclosure rates, the authors develop a value-at-risk CRE portfolio stress-test methodology. They document the build-up of CRE concentrations in bank loan portfolios and explain how banks can use a spreadsheet-based simulation methodology to measure their portfolio risk across the entire loan portfolio.
The calculation of portfolio unexpected loss in credit and operational risk
Michael Samuels
In effective risk management, it is of importance to take account of risk aspects from both a credit and operational risk viewpoint. This paper attempts to address both of these areas. The essential tool is the calculation of joint default probabilities starting with an asset correlation and a bivariate normal joint distribution assumption, for log returns of asset values in the case of credit risk, and, an event correlation and a bivariate normal joint distribution assumption for performance scores in the case of operational risk. From this it is shown how to calculate default correlations between counterparties or operational risks and hence a method for assessing unexpected loss for portfolios. The method of moments may then be used to construct a portfolio loss distribution and an appropriate extremal loss measure such as 99.9 per cent value at risk (VaR) or tail VaR.
The issue will also include a review of the Report on Trading of OTC Derivatives of the Technical Committee of the International Organization of Securities Commissions, by Allan D. Grody.
PRMIA full Sustaining members receive the digital version of the JRMFI as a part of their membership. Volume 5, Number 1 will be accessible in their "My Library" area of the PRMIA website later this week. To purchase a Journal subscription, visit http://prmia.org/index.php?page=training&option=trainingRMFILibraryJournal.
The quarterly survey, which examines such topics as consumer credit delinquencies, underwriting standards, the balance of supply and demand, and related issues, will take 10 minutes or less to complete. All responses are strictly confidential. Past survey results have captured the interest of national media outlets, making this survey a prominent voice on the current state of U.S. Consumer Credit.
To begin, please click this link: http://www.surveymk.com/s/5CLNFTT. The survey closes on February 17.
Thank you for contributing!
]]>The PRM designation program, comprised of four exams, is the global standard for the world's top financial risk professionals, having received public endorsements from both business and universities. A PRM assures that the holder has the required broad knowledge and understanding, qualitative and quantitative, that risk managers must bring to the job.
Mr. Nowakowski's PRM exam scores were the highest of all PRMIA members who earned their PRM designation between January 1 - December 31, 2011, qualifying him for the distinction of 2011 Candidate of the Year.
Upon receiving the award, he said, "Working in ALM and the investment area I really appreciate the wide knowledge gained during preparation for PRM certification. In a short period of time I developed from a regular specialist to a real expert recognized in my organization as a source of information, consultation and advice in a very wide range of activities like risk management, investment policy, development of investment products, complex financial instruments valuation, capital requirements under changing regulatory environment affecting not only banking but also insurance sector. I have learned how to look at all business activities through risk/return perspective." Mr. Nowakowski adds, "But what is maybe even more important, I have realized that risk/return perspective is really universal and has many non-financial, unquantifiable dimensions. Now I look through this perspective also at everyday life, human behavior and decisions taken by people in all situations and on all possible levels, from government and supra-national authorities and policy-makers to social and personal relationships."
Ten Focus Awards were awarded for highest individual exam scores for the period of January 1 - December 31, 2011. For exams with tied top scores, two or more awards are given. Click here for a full list of 2011 award recipients, as well as past winners.
SUBMISSION OF ARTICLES
The Publisher and Editorial Board welcome the submission of articles in the following areas:
The following types of papers will be considered for publication:
Practice papers: Thought pieces, briefings, case studies and other contributions written by practitioners. All case studies must address the following questions: What has worked? Why has it worked? What lessons were learned? How could it be done elsewhere?
Articles should be 3,000 to 5,000 words in length.
Research papers: Contributions which explore new models, theories and research in risk management. The principal management implications of the submission should be included. Articles should be around 5,000 words in length.
All submissions should be sent to Julie Kerry, Publisher, Journal of Risk Management in Financial Institutions at julie@hspublications.co.uk
Further information about the Journal is available at http://www.henrystewart.com/jrmfi.aspx.
We will celebrate our 10th anniversary by doing what we do best: giving our 80,000 members from around the world a chance to join together. This will be a unique opportunity for you to learn from industry leaders, as well as share experiences and talk with other risk professionals who share similar concerns and questions about the challenges posed by today's difficult economic situation. The conference will focus on a plethora of issues vital to today's complex and uncertain environment.
Register Now and save 30% on full conference registration fees. Greater discounts are given to PRMIA Sustaining Members.
Conference Highlights Include:
One full day of pre-conference seminars focused on global topics, technical skills, practical experience and the latest theory in selected risk management disciplines
Two-day conference comprised of:
Featured Keynote Speakers:
Visit www.prmia.org/globalriskconference to learn more about the conference or to register.
Chair
Carol Alexander
Chair of Financial Risk Management, ICMA Centre, Henley Business School at Reading Whiteknights
Vice-Chair
Colin Lawrence
Director, Risk Specialists Division, Financial Services Authority (FSA)
Visiting Professor, Risk Management, Cass Business School
Treasurer
Robert Mark
CEO, Black Diamond Risk
Secretary
Oscar McCarthy, PRM
Strategic Risk Advisor, ABN Amro Markets
Congratulations to this year's Executive Committee, and thank you to Thomas Day, who recently completed his term as Vice-Chair.
Managing inflationary risk in a dollar-priced world - A key policy priority for the G-20
Editorial Board Member (author wishes to remain anonymous)
An evolving differentiation in recovery rates across the G-20's constituent economies has resulted in an increasingly politicised fragmentation in policy coordination. The Seoul summit endorsed, for the first time, member states pursuing unilateral macro-prudential measures to manage cross-border capital flows. The implications for the control of risk are uncertain as such measures are likely to challenge the assumption that capital is cross-border fungible. This commentary reappraises the evolution in risk transmission processes which have led to a polarised G-20 endorsing unilateral regulatory policy initiative. In addition, it presents an alternative framework whereby inflationary sensitive commodities markets might function in a multi-currency clearing system thus short-circuiting the causal relationship between a devaluing dollar and emerging economies' inflation.
Risk-minimising investment strategies - Embedding portfolio optimisation into a dynamic insurance framework
Ursula Theiler
While Markowitz's framework of portfolio optimisation aims to eliminate diversifiable risk, it does not consider protection against the undiversifiable, systematic risk of market downturns. This paper investigates a concept of risk-minimising investment strategies, which embeds revolving portfolio optimisations into a framework of dynamic portfolio insurance and thus links the two approaches of minimising the diversifiable and controlling the undiversifiable risk.
The computation of optimised credit transition matrices
Kete Long, Sean C. Keenan, Radu Neagu, John A. Ellis and Jason W. Black
In this paper, a framework for generating empirically consistent Transition probability matrices (TPMs), using an optimisation methodology, is presented. Optimised TPMs produce default term structures that are substantially more accurate in terms of their ability to match empirical observations over multiple time periods than those produced by exponentiating single period empirical TPMs. Additionally, it is found that optimised TPMs show smoother surfaces with consistent probability mass distributions (monotonicity), reduce the impact of the Markov assumption, and reduce discrepancies of credit migration over multiple time horizons.
The Crash-NIG copula model: Risk measurement and management of credit portfolios
Anna Schlosser and Rudi Zagst
The one-factor copula models became very popular for modelling dependence in credit portfolios and collateralised debt obligation (CDO) valuation owing to their simplicity. Still, it is also well known that they are too simple for an exact pricing. Nevertheless, it is possible to extend the model in various ways so that it is possible to describe historical correlation behaviour realistically. Such an extension of the one-factor copula model, called the Crash-NIG copula model is proposed by the authors.
Market BuVaR: A countercyclical risk metric
Max Wong
The malfunction of the value-at-risk (VaR) model during the 2008 credit crisis was a key risk management failure. This metric is now criticised for being too little, too late. An improvement is proposed - making VaR countercyclical and more robust to fat tails. The new metric is called bubble-VaR (BuVaR), the expected shortfall of a trading book portfolio with the effects of procyclicality removed. This method is useful for the purpose of a countercyclical capital buffer for market risk. The approach relaxes the VaR assumptions of independent and identically distributed (i.i.d.), and stationarity of variables. It postulates that the empirical phenomena of fat tails, skewness, volatility clustering and the leverage effect can be better understood by modelling the noise and cycle components together, instead of just the noise of the time series as modelled in VaR.
PRMIA full Sustaining members receive the digital version of the JRMFI as a part of their membership. Volume 4, Number 4 will be accessible in their "My Library" area of the PRMIA website later this week. To purchase a Journal subscription, visit http://prmia.org/index.php?page=training&option=trainingRMFILibraryJournal.
The short survey will take 10 minutes or less to complete. All responses are strictly confidential. To begin, please click this link: http://www.surveymk.com/s/RBG73ZW. The survey closes on November 14. Everyone completing the survey receives a copy of the full results.
AMERICAS REGION
Dr. Robert Mark
Managing Partner & Chief Executive Officer, Black Diamond Risk
EUROPE/MIDDLE EAST/AFRICA REGION
Dominik Dersch
Principal Consultant, Dominik Dersch Beratung
ASIA/PACIFIC REGION
Shaun Bond
Chief Risk Officer, Bank of Montreal, Beijing
Robert Mark and Dominik Dersch were re-elected for a 3-year term, while Shaun Bond is new to the Board, replacing Phang Hong Lim. Our sincere thanks and appreciation to Phang Hong Lim for his years of service and leadership to PRMIA. Thank you also to all of this year's nominees. We look forward to their continued participation and leadership.
Please also note that the proposed changes to the PRMIA bylaws passed by a significant margin, greater than 96%. The updated bylaws will be accessible soon on the PRMIA website.
Thank you to everyone who voted. We appreciate your participation in this important process.
1. the individuals that will join the PRMIA Board of Directors in November 2011 for a three-year term, AND
2. proposed changes to the Bylaws of PRMIA
Voting through the website is the easiest way to register your wishes, but please do not delay because the ballot closes at 8:30 a.m. central US time on 27 October 2011.
1. BOARD ELECTIONS
The candidates are:
AMERICAS
Carlos da Costa
Dr. Robert Mark
Leo Tilman
EMEA
Dominik Dersch
ASIA PACIFIC
Shaun Bond
Albert Liu
The profile, vision statement, and endorsements for each candidate can be viewed along with instructions for voting on www.prmia.org/election2011.
2. BYLAWS
PRMIA's original bylaws were written when our association was founded 10 years ago. The Board agrees that it would be in the association's best interest if we implement some changes to our bylaws at this time. The proposed changes are summarized as follows:
Please note that only members registered with PRMIA as of 19th September, 2011, are eligible to vote.
PRMIA today announces that Dr. Dan Rodriguez has been chosen as the winner of the 2011 PRMIA Higher Standard Award. This prestigious award is granted to an individual who has significantly impacted the global practice of risk management, provided a substantial contribution to the mission of PRMIA and its members, and shows an ongoing commitment to the highest standards of the profession.
Dr. Rodriguez is the Chief Risk Officer, Global Arbitrage Trading and the Americas Equity Division at Credit Suisse. In addition, he teaches part-time at Baruch College's Zicklin School of Business and Fordham University's Masters in Global Finance program in New York City. For several years he has served as a faculty member for PRMIA's Complete Course in Risk Management at Columbia Business School Executive Education and in 2011 taught the Market Risk Management sequence of the course. He has presented PRMIA webinars, reaching hundreds of financial professionals around the world and educating them on some of the latest methodologies in risk management. He also continues to work closely with the New York PRMIA chapter leadership to organize chapter events and enlist high-level guest speakers from industry and academia.
Dr. Rodriguez has been involved with PRMIA as a volunteer since 2004. He shares what motivates him to volunteer, "I appreciate the fact that PRMIA is a not-for profit organization dedicated to developing risk managers and to setting higher standards for the profession. I believe in PRMIA's mission and, as someone who was brought up to believe in the importance of serving a greater good, I aspire to that by contributing my skills and experience. Additionally, I enjoy shaping and developing curricula and educating other executives across the industry about risk management."
Jodi Lundell, PRMIA Chief Operating Officer, congratulates and thanks Dr. Rodriguez, "On behalf of PRMIA members around the world, I wish to express appreciation for Dan's commitment to a higher standard of risk management and risk education. He is highly respected by the organization's leadership and members, as well as throughout the industry. We are very fortunate that Dan has chosen to share his time and expertise with us."
As the winner of this year's award, Dr. Rodriguez was given the opportunity to select a scholar or student to receive a $5,000 educational grant to further their continued education in the field of risk management. Dr. Rodriguez selected Xiaoning Gong, a MS in Quantitative Finance student at Fordham University, Graduate School of Business.
This issue's Visions of Risk section features five thought-provoking articles, summarized below:
Systemic Risk - It's Still All About the Data
By Allan Grody
The financial services industry today consists of monstrously complex global financial institutions ... systemically important ... too big to fail... even too complex to manage! Regulators are focused on observing systemic risk in these giant, global institutions. Systemic risk analysis is a new discipline in its infancy. We have barely figured out the science of individual enterprise risk management when we now have placed another burden on our regulators through the Dodd-Frank legislation and soon through the European Communities central bank. This is the burden of observing the buildup of risk that has the potential of cascading into the global contagion of systemic risk. However, it is understood that without a global view of the underlying positions and cash flows, aggregated through common identifiers, systemic threats cannot be detected.
Recovery and Resolution Planning - Asking the Right Questions
By Andrew Davidson
In November 2011 the G20 leaders will endorse recommendations to address the moral hazard posed by Systemically Important Financial Institutions (SIFIs). This will include the requirement for an "adequate and credible" recovery and resolution plan (RRP) from any firm deemed to have a potential impact on financial stability. What questions should firms ask themselves in relation to their RRPs?
Five Downside Risks to the Global Recovery: Global Macroeconomic Outlook and Risks
By Juan Licari, Ph.D. and Andrea Appeddu
The economic recovery of the major Western economies appeared uncertain as the fourth quarter of 2011 began. In the U.S., the outlook for consumers has deteriorated markedly, with the unemployment rate edging higher, confidence shaky and house prices still weak despite accommodative monetary and fiscal policies.
IT Risk Evaluation
By John Kyriazoglou
This article describes a methodology to be used in offering concluding remarks to the management of an audited entity as to whether, for each objective assessed during an audit assignment, the situation is satisfactory, requires improvement or unsatisfactory. The aim is to provide a conceptual and practical framework to define and implement an evaluation method for Internal Audit assignments. The main uncertainties are identified and the objectives of Internal Audit are described, then we present an evaluation methodology for risk assessment.
Stress Testing: Lessons Learned and Emerging Requirements - The U.S. and European Banking Authority (EBA) Frameworks
By Thomas Day
Banks are increasingly required to integrate risk infrastructures, governance processes, and risk appetite frameworks in ways that have not been required in the past. While stress-testing is nothing new, the recent U.S. and E.U. stress-testing requirements and guidance represent a methodological shift, combining risk analysis and measures that have historically remained in silos. Meeting the new framework of requirements in a repeatable fashion requires unprecedented coordination across various business, risk, and operational units. A major insight from the last couple of years is that all banks are subject to the same macro-economic shock(s). For all the talk about enhanced risk management, enterprise-risk modeling remains primitive and non-integrated at many systemically important financial institutions (SIFIs). During the crisis, regulators were flying blind and not much has changed. A new framework for flexible, forward-looking, and integrated scenario analysis and stress-testing is needed. Implementing such a framework and combining business, capital, and risk strategy requires an enterprise decisioning tool that is agile, flexible, and serves the needs of internal and external stakeholders.