Corporate Financial Risk Management
When talking about risk management we mostly talk about the risk within financial institutions: banks, asset managers, insurers, etc. However, non-financial companies, which form a much bigger part of the economy, are also exposed to financial risks and devote significant resources to risk management. In this course, we will reveal and discuss the basics of Corporate Financial Risk Management.
Instructed by:
Stanley Myint, PhD
BNP Paribas and Oxford University
Session Length:
8 lessons, 3 case studies
~60 minutes each
Course Period: March 14 - May 8, 2023
Lessons Launch: Each Tuesday
Course Access: 90 Days
Time:
Self-paced, Self-study
| About This Course |
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When talking about risk management we mostly talk about the risk within financial institutions: banks, asset managers, insurers, etc. However, non-financial companies, which form a much bigger part of the economy, are also exposed to financial risks and devote significant resources to risk management. In this course, we will reveal and discuss the basics of Corporate Financial Risk Management.
Over the eight lessons, we will discuss the following:
- What is corporate financial risk management (CFRM) and how is it different from the management of risk for financial institutions
- Why in theory CFRM does not add value: Modigliani-Miller irrelevance theorems (1958) and why in practice CFRM adds value: real world
- How companies manage the following risks: funding, currency, interest rate, counterparty, commodity
Gain Practical Experience with Case Studies
Using three case studies throughout the course, participants will be required to analyze market risks and create simple risk management policies.
After attending this course, you will be able to:
- Describe how corporate RM is different from RM for financial institutions
- Remember the main areas of CFRM and main CFRM products
- Analyze the funding, currency, interest rate, commodity and counterparty risks in a variety of frameworks
- Create a simple risk management policy for a number of companies
Prerequisites
- Basic concepts of corporate finance and accounting (e.g., concepts of EBITDA, Net Debt, book vs. market value of equity, efficient frontier)
- Basic concepts of mathematical finance and statistics: log-normal distribution, variance-covariance, Monte Carlo simulation, Value-at-Risk
- Basic understanding of financial markets: loans, bonds, FX and interest rates, commodity prices
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| Agenda |
| Week |
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Topic |
| March 14 |
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Introduction
• What is CFRM
• Theory and practice of CFRM
Market Risk Quantification
• Earnings at Risk
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March 21
Case Study 1
to be completed |
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Funding Risk
• Different measures of funding risk
• Examples of funding risk mismanagement
• Trade-off theory
• Optimal debt maturity
Drivers of Funding Cost
• Fundamentals
• Market risk premium
• Technicals (CDS liquidity)
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| March 28 |
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Currency Risk Management
• Examples of currency risk mismanagement
• Dynamics of G10 vs. Emerging Markets currencies
• Three types of currency risk
• Transaction risk management
Translation Risk Management
• Matching assets and liabilities
• Variance-covariance method
• Book value at risk
• Efficient Frontier
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April 4
Case Study 2
to be completed |
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Commodity Risk
• What is specific about commodity risk
• Hedging oil revenues
• Hedging oil costs
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| April 11 |
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Interest Rate Basics
• Pricing bonds and swaps
• Relationship between discount factors and forward rates
Yield Curves
• Components of the funding cost
• Interest rate swaps
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April 18
Case Study 3
to be completed |
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Interest Rate Risk Management
• Asset and liability management
• Risk versus return
Fixed Floating Mix & Duration
• Drivers of fixed-floating policies
• Historical swap premium
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April 25
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Counterparty (Credit) Risk
• Reduced form models
• Correlated defaults
Credit Risk Modelling
• Optimum deposit composition
• Counterparty risk and credit charges
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May 2
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Risk Management Process in Practice
• Risk management policy
• Organization
• Mitigation of derivative risks
• Benchmarking |
| Who Should Attend |
- Risk managers in financial companies who are interested in how the risk management techniques are used in the non-financial corporate benefit
- Risk management consultants
- Junior corporate risk managers and bankers covering corporate clients
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| About Our Expert |
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Stanley Myint, PhD is the Head of Risk Management Advisory at BNP Paribas and an Associate Fellow at Saïd Business School, University of Oxford. At BNP Paribas, he advises large multinational corporations on issues related to risk management and capital structure. His expertise is in quantitative and corporate finance, focusing on fixed income derivatives and optimal capital structure. Stanley has 25 years of experience in this field, including 14 years at BNP Paribas and previously at McKinsey & Company, Royal Bank of Scotland and Canadian Imperial Bank of Commerce.
Stanley has a PhD in physics from Boston University, a BSc in physics from Belgrade University and speaks French, Spanish, Serbo- Croatian and Italian. At the Saïd Business School, Stanley teaches two courses with Dimitrios Tsomocos and Manos Venardos: “Financial Crises and Risk Management” and “Fixed Income and Derivatives.”
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| Continued Risk Learning Credits: 7 |
PRMIA Continued Risk Learning (CRL) programs provide you with the opportunity to formally recognize your professional development, documenting your evolution as a risk professional. Employers can see that you are not static, making you a highly valued, dynamic, and desirable employee. The CRL program is open to all Contributing, Sustaining, and Risk Leader members, providing a convenient and easily accessible way to submit, manage, track and document your activities online through the PRMIA CRL Center. To request CRL credits, please email [email protected].
| Registration |
| Membership Type |
Price |
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| Members |
$ 399.00 |
| Non Member |
$ 499.00 |
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