Lesson 1: Introduction of ERM 2.0 Processes and Drivers

In this lesson, we introduce the key concepts of performance measurement, Enterprise Risk Management (ERM). We will discuss the need for a more forward-looking approach to ERM and summarize the recent regulatory developments in this area.

Key topics addressed in Lesson 1:

  • Forward-looking Enterprise Risk Management (ERM 2.0) vs. historical performance measurement
  • Overview of forward-looking risk and finance processes (ICAAP, ALM, budgeting, capital planning)
  • Balance sheet forecasting vs. stress testing (enterprise vs. local) and sensitivity analysis
  • Forecasting and modelling fundamentals
  • Regulatory drivers (CCAR, EBA stress testing, ICAAP, ILAAP, recovery funding plans)
  • Business drivers (scenario analysis, geopolitical uncertainties, strategic planning and steering)
  • Internal vs. regulatory stress testing

Lesson 2: Enterprise Stress Testing & Credit Risk 

During this lesson, we introduce the KPIs and KRIs relevant for stress testing and discuss the steps and roles within the enterprise stress testing process. In the second half, we will zoom into the stress testing of credit risk in the banking book.

Key topics addressed in Lesson 2:

  • Recap: Forward-looking Enterprise Risk Management (ERM 2.0) and the relevant drivers
  • Finance and accounting fundamentals (balance sheet, provisions, P&L, profit, capital)
  • Risk fundamentals (Basel capital and liquidity framework, economic capital)
  • Joined risk and finance perspective, and impact on KPIs and KRIs
  • Enterprise stress testing framework, processes and orchestration, and regulation
  • Credit risk and IFRS 9 fundamentals (RWA, Collateral, ECL)
  • Stress testing credit risk, ECL, scenario analysis, and regulation

Lesson 3: Stress Testing Market & Liquidity Risks

During this lesson, we will exam KPIs and KRIs relevant for forecasting and stress testing of market and liquidity risks. We will discuss the specifics and common approaches as well as the relevant frameworks for stressing market and liquidity risks. 

Key topics addressed in Lesson 3:

  • Recap: ERM 2.0, enterprise stress testing process & framework, and stress testing of credit risk
  • Finance and accounting fundamentals (financial instruments (Re)valuations and impairments, hedge accounting, profit and balance sheet impact of market and liquidity risk)
  • Risk fundamentals (Basel market risk and liquidity risk framework, ALM, IRRBB, Counterparty default risk)
  • Stress testing market and liquidity risk
  • Joined risk, finance perspective, and impact on KPIs and KRIs; dependencies and correlations between market and liquidity risk and other risk types

Lesson 4: Incorporating Operational & Strategic Risks 

In this lesson, we will explore the approaches for stress testing of strategic and operational risks, discuss the relevancy of climate change risks and AI in stress testing. Lastly, we will provide the tools to use for Model Risk Management in the stress testing process.

Key topics addressed in Lesson 4:

  • Recap: ERM 2.0, enterprise stress testing process, credit risk, ALM, market risk
  • Introduction to operational risk capital, strategic planning, Pillar 2 risks, management actions
  • Climate change risks and scenarios
  • Scenario, sensitivity and attribution analyses 
  • Stress testing operational risk
  • Artificial intelligence, advanced analytics and stress testing
  • Model risk management and stress testing

Lesson 5: Alignment and Roll-out of a Successful Stress Testing and Forward-Looking Framework

During the last lesson, we discuss the success factors for implementation of an efficient and effective enterprise stress testing framework and learn tips for increased integration, higher business benefits, and faster time to decision. In particular, we will zoom into enabling role of dedicated technology.

Key topics addressed in Lesson 5:

  • Recap: ERM 2.0, stress testing of individual risk types, AI and model risk management
  • Integrated stress testing and forward-looking approach vertically (IFRS 9, liquidity, stress testing) and horizontally (capital planning, budgeting, stress testing, ALM)
  • Organizational set up and business benefits
  • Transparency , audit-ability and BCBS 239
  • Stress testing systems and result analysis & reporting 
  • Future outlook