October 19, 2007
A Chat with PRM Candidate of the Year 2007, Mr. Vinayak Kamat, Pune, India
Recently, I had a chat with the PRM global topper , Vinayak Kamat from Pune, India. Vinayak has been named the 2007 PRM Candidate of the Year."This is a highly prestigious award, identifying the best of the best among our PRM holders," said David R. Koenig, former Executive Director of PRMIA. "We were highly impressed by Vinayak and congratulate him on this international recognition."
Vinayak deserves our heartiest congratulations and appreciation for his achivement, considering the fact that he has achieved this distinction competing with candidates around the world and brought honour to a country which is now catching up ( fast, mind you) with risk management practices of the advanced economies.
I hope this interview will be of some use to the growing group of PRM candidates.
A Chat With vinayak kamat, PRM Candidate of the Year 2007 from Pune, India
SR: What motivated you to appear for PRM?
Vinayak: I had some basic knowledge in the area of risk management due to previous exposure but I was looking for ways to validate and enhance the same. I also wanted to and upgrade my skills and exercise my learning ability in the process. The best way to achieve this was to go for an industry standard certification program like PRM. I was impressed with the PRM curriculum and its self-paced structure. This in turn allowed me to take the exam at my convenience.
SR: How much time you devoted to preparation before taking the examination?
Vinayak: I had attempted all 4 exams together. Overall I think I devoted around 200 hours (on an average 10 hrs per week for 20 weeks) for preparation. However, it took longer in terms of elapsed time, as I had to take a few extended breaks in preparation due to professional and personal reasons.
SR: What resources/books/courses you find useful for study for papers I, II, III, IV?
Vinayak: The PRM handbook was my primary study material. As an additional reference on some topics, I studied the FRM Handbook. For quantitative subjects, I also referred few standard reference books. In some cases, I found useful information on the web. I relied on self-study and did not take any courses.
SR: Where did you appear for the exam? Did you find any difficulty in selecting an exam center?
Vinayak: My preference was a center close to my residence. Also I needed a slot for 6.5 hours for the entire exam on my preferred dates. With these criteria, I selected a center at Borivali, Mumbai. I got their details from the Pearson Vue website and visited their premises once to see the facilities. I could book the slot with a couple of days notice. I did not face any particular difficulty in selecting the center.
SR: What tips you would like to offer to prospective PRMIA candidates?
Vinayak: Make a plan and commit to it. Avoid extended gaps in preparation. Devote some time daily. Try some practice questions and tests. Last but not the least, enjoy learning the subject.
SR: What this Award means to you and how it has helped you so far?
Vinayak: I am delighted and proud to receive this award. The evaluation process was quite challenging. Also the competition was global and of very high quality. Hence I rate it as one of my most special achievements. Professionally, the award has brought me recognition. Personally, it has given me added self-confidence and motivation.
SR: Thanks Vinayak, for your time. If i receive more questions from PRM candidates, I'll get back to you for another interview. All the best !
Posted by sunandoroy at 11:29 AM
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Managing Risks in the Age of Turbulence
Emerging economies have entered the age of turbulence. Assets prices are far more volatile, markets are ultra sensitive to news and cross border shocks have started disrupting emerging markets with remarkable regularity.
As traditional risks give way to new risks, let us explore the areas where financial entities should be more alert to address their risks. What are the key issues in this age of volatility?
State in the Scanner
The State and its actions are always of interest to risk managers. in the wake of globalisation and privatisation in India, many obituaries were written about the State as markets started taking over. But, the State has rebounded decisively. In turbulent waters, the State is playing a critical role in guiding the market.It has done a commendable job as far as market regulation and guidance is concerned and in the near future also , State action will continue to impact the market behaviour significantly.
Communication and Risk
What is of particular interest is the growing importance of communication in risk management. The way FM talk on Participatory Notes(PNs) reversed market movements recently is one example of this. Ccommunication and signaling from the State is to be looked at more closely than ever to gauge market movements and anticipate future shocks.
Cross Border Issues
Global integration has increased in the last decade with many emerging economies getting linked in many ways to each other and advanced markets. Volumes in forex markets have grown. Size has become an important explanatory factor for higher returns and stability.
The importance of liquidity has grown manifold as liquidity shocks arise not only from domestic but from beyond the borders. Cross border capital and financial flows have become important for systemic stability. As the recent subprime crisis shows , heightened credit risk leading to liquidity crunches can have huge impact in an interlinked global financial system.
II. Action Points for Financial Entities
In this situation, a financial institution will require robust risk management framework that is enveloped in a prompt corrective action framework set by the regulator. This will limit incentives for excessive risk taking and getting the benefits from usual mispricing in deposit insurance systems.
2. Traditional analysis of risks in emerging econoies should be bolstered with a proper assessment of forex exposures and risks. Many software companies in india got badly hit by not looking into this during early months of 2007 when rupee rose from 46 to a dollar to about Rs 41 to a dollar. In other words, processing forex market information is crucial.
3. Embedding liquidity Risks in traditional risk measurement approach is crucial ( Pillar II of Basel II highlights this)
4. Concentrations should be properly monitored . concentration Risks are going to be a major source of risk. The well known benefits of diversification will be magnified in a globalised world.
5. A review of Stop Loss limits is a must first step for trading desks. There is a need to understand that markets will fluctuate around a trend. For example, in India, the trend is positive and as forecasts indicate ( IMF and others) India will continue to grow at 8.5 or even more. The rigidity in stop loss limits for traders will lead to a lot of distress selling and booking losses. Taking a flexible approach is the need of the hour in trading strategies.
III. Role of Regulation
Regulation is critical to the entire context of risk management. Appropriate regulatory framework enabling prompt corrective measures coupled with legal clarity can go a long way in managing risks in a globalised world
As we are seeing, robust regulation of banks and weak regulatory structure of non-bank entities can lead to shocks in financial system. Non Banks, reinsurers, hedge funds , left in an unregulated space will lead to imbalances in financial systems.
Second, co-ordination of home and host country regulators is important for quick reaction to adverse stress scenarios.
Third, alignment of legal structures internationally is also critical for handling cross border risks.
Posted by sunandoroy at 05:42 AM
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October 18, 2007
Emerging Markets Driving Global Growth : IMF
The IMF in their recent World Economic Outlook notes that emerging markets China, India are for first time largest drivers of world growth . Strong emerging markets growth is attributed to sound policies, benign external conditions .China is now the single most important contributor to world growth, in terms of both market and purchasing-power-parity (PPP) exchange rates .Its economy continues to grow at breakneck speed, turning it into a driving force in the global economy.
China's economy gained further momentum in 2007, growing at 11½ percent, and is expected to grow by 10 percent in 2008. Other emerging markets are also growing strongly. India continued to grow at more than 9 percent in 2007, and Russia grew by almost 8 percent.
In fact, these three countries alone accounted for more than one-half of global growth over the past year. Other emerging market and developing countries have also maintained robust expansions. Rapid growth in these countries counterbalanced continued moderate growth in the United States .
Looking ahead, The IMF expects that emerging market countries will continue to get the benefits of careful macroeconomic management and also benefit from favorable external conditions, including high commodity prices. But there are uncertainties about the outlook.
In China and India, IMF feels that growth may not slow as anticipated if recent monetary policy tightening proves insufficient to cool domestic demand growth. But the main downside risk is that continued turbulence in global financial markets could disrupt financial flows to emerging markets and trigger problems in domestic markets. This is particularly a concern in countries with large current account deficits and substantial external financing needs.
But despite these and other risks linked more directly to the global outlook, the IMF expects emerging markets to remain strong in the foreseeable future.
Note
Market exchange rates are those prevailing in the foreign exchange market, while the PPP exchange rate is defined as the rate at which the currency of one country needs to be converted into that of another country so as to be able to purchase the same amount of goods and services in each country. Use of PPP exchange rates gives a greater weight to emerging market economies in the global growth aggregates.:
Posted by sunandoroy at 07:19 AM
