Core Principles of Credit Risk Management

• Introduction to Credit Risk Management: Definition, importance, and scope of credit risk in financial institutions.
• Understanding Credit Risk: Types of credit risk, factors influencing credit risk, and credit risk assessment methods.
• Credit Risk Measurement: Credit scoring models, credit ratings, and credit risk metrics.
• Credit Risk Mitigation Strategies: Collateralization, credit derivatives, and credit insurance.
• Regulatory Landscape: Overview of regulatory frameworks such as Basel III and its implications for credit risk management.
• Case Study: Analyzing credit risk exposure in a loan portfolio and devising risk management strategies.

Credit Culture and Risk Profile

• How the credit crunch and its origins have affected our approach to credit risk.
• Definitions of default.
• Default probability recovery rates, LGD (Loss Given Default), and exposure at default.
• Impact of credit risk on the bank’s balance sheet, income statement, cash flow statements, and equity prices.
• Ratings agents' approach to credit risk.
• Lessons to be learned from the credit crunch.

Credit Risk Analysis and Modelling, Risk Assessment

• What information is required for credit risk analysis?
• Credit risk assessment tools.
• Customer risk assessment versus credit portfolio risk assessment.

Controlling Credit Risk, Risk Mitigation

• Loan policy issues.
• Strategic planning for the loan portfolio.
• Loan portfolio objectives.
• Structured finance, financial covenants, collateralization, syndication, limitation.
• Securitization and Risk Transformation.
• Techniques for moving risk off balance sheet, CDOs, and other tranche products.
• Pros and cons of securitization for origination firms and investors.
• The role of rating agencies.

Credit Risk on Portfolio Level vs. Single Transaction

• Loss distributions and relationship to expected loss, worst credit loss, economic and regulatory capital definitions.
• Computer Workshop: Spreadsheet exercises for simple portfolio credit model.
• Introduction to portfolio credit risk models; CreditRisk+, CreditMetrics.
• Optimizing portfolios for best risk/return.
• Tail risk.

Operational and Integrated Risk Management

• Understanding Operational Risk: Definition, types of operational risk, operational risk event categories.
• Operational Risk Measurement: Loss distribution approach, scenario analysis.
• Operational Risk Mitigation: Controls and processes, insurance, outsourcing.
• Integrated Risk Management Frameworks: ERM (Enterprise Risk Management), COSO framework.
• Risk Governance: Role of board and senior management in risk oversight.

Advanced Credit Risk Topics

• Stress Testing and Scenario Analysis: Techniques and importance in credit risk management.
• Credit Risk Transfer Mechanisms: Credit default swaps, total return swaps.
• Basel III Requirements: Advanced internal ratings-based approach (AIRB), standardized approach.
• Credit Portfolio Management: Techniques for managing concentration risk, industry and sector risk.
• Credit Risk in Emerging Markets: Challenges and strategies.

Case Study and Practical Application

• Developing an integrated risk management framework for a financial institution.
• Real-world examples and best practices in credit risk management.
• Group Discussion: Key takeaways and implementation strategies.
• Final Q&A and Wrap-up: Addressing participant questions and providing additional resources.