Risk-Aware Corporate Finance

2 DAY WORKSHOP
(Workshop is not being offered at this time)

Qualifies for Continuing Education Credits:

• NASBA CPE - 19.2
• CFA CE - 16
• ACCA CPD

Introduction

Comprised of open lectures and interactive sessions, this workshop is designed to motivate the risk practitioner to understand corporate risk management issues deeply, robustly and personally. The goal of this workshop is to take a practitioner who has been exposed to these issues and help them appreciate the range of problems and integrated solutions used by corporations to address risk management concerns.  This workshop would be ideal for a corporate financial executive or service provider to financial executives at corporations, such as a banker, advisor or consultant.

Case studies of corporations will include financial institutions, commodity producers, and manufacturers.  The teacher of the course is Dr. David Shimko, who has written extensively in this area and is one of the world’s leading experts in corporate risk management.  He has also taught much of this material at the Harvard Business School and New York University.  He also founded Risk Capital; an independent consultancy focused on these issues, and sold the company in 2006.  Finally, Dr. Shimko is authoring a textbook whose draft chapters will be offered exclusively to class participants as supporting material for the lectures.

Content

Attendees are requested to ensure that they bring their fully charged laptops, with excel, as there are a number of exercises and practical examples throughout the day. GARP will not be able to provide laptops for these exercises.

Day 1 Morning Session

• Case studies:  Understanding the reasons behind colossal corporate risk management failures
• The risk control environment of the corporation: 
- Government
- Industry regulators
- Rating agencies
- Bondholders
- Counterparties
• Risk principles, policies and procedures:  Corporate risk governance from shareholders to risk-takers
• Corporate risk reporting

INTERACTIVE EXERCISE:  Building a corporate risk management policy for a life insurance company

Day 1 Afternoon Session
 
• Risk and forecasting
- The stochastic pro-forma
- Issues in simulation (review documents provided prior to course)
- Benefits of the stochastic pro-forma

INTERACTIVE EXERCISE WITH EXCEL:  Building a stochastic proforma for an oil refinery

• Market risk hedging and risk management strategy
- Survey of Tools (derivatives, insurance)
- Example  Interest rate swaps:  A holistic risk perspective vs. the bank pitches
- Objectives
- Risk premia
- Special considerations for managing trading activity (e.g. treasury)
- Popular misconceptions and traps
- Recasting the optimal capital structure decision

Day 2 Morning Session

• Enterprise risk:  Real source of value?
• Corporate credit risk measurement, costing, and management
- Counterparty relationships
- Potential Future Exposure and Margin at Risk
- Differential contract pricing based on risk
- Corporate hedging of credit risk
• Risk-taking, performance measurement and risk-based compensation
- Marketer as trader
- Hidden risks in the corporate marketing function
• Operational risk measurement and management

INTERACTIVE ENTERPRISE RISK CASE

Day 2 Afternoon Session

• Risk-based valuation
- CFAR and PVAR methods
- Purposes, pros and cons
- Risk-based decision-making
• Guided application discussions
- Pension risk management (different module in the US and the UK)
- Risk-aware budgeting and integrated procurement
- Risk management in M&A and corporate negotiations