What is Risk Management?
The name itself tells us what this subject is going to be dealing with, ‘risk’ is a common word that we use in our day to day while we talk about a possible uncertainty which might have a negative impact or lead to a loss if it goes south!
So managing such risks or unforeseen events that arise within the organization is what risk management is all about. The study of risk management aims to minimize the damages and try to control them if possible so as to suffer minimal damage for the company. Every company has its goals set up short term as well as long term and risk management helps people stick to those goals in all times of problems or uncertainties with minimal damage.
It is extremely important to know what sort of risks and uncertainties the company faces and plan and schedule activities in a way to ensure that there is minimum damage in case of a negative outcome of the risk taken. As students of the BFM course our interaction with risk management is going to be more towards the financial risks that are encountered and these risks can come in various forms such as market risk, liquidity risks, exchange rate risks, etc.
We shall be studying about these different kinds of risks and how to ensure that there are back-ups and safety nets to get us out of them if things don’t work out in our favor.
What is the Syllabus for this Subject?
- Introduction Financial Risks
- Different types of financial risks
- Market risk,
- Liquidity risk,
- Credit risk,
- Operational risk,
- Systemic risk,
- Exchange rate risk
- Diversification and Investment Risk Management
- Alternate Investment Strategies
- Sensitivity Analysis Exposure and Hedging
- Cross Hedging,
- Hedge Ratio
- Statistical Analysis Options and future in different markets including foreign exchange market
- Popular models for managing liquidity risk and credit risk, swaps – Structural models ,
- Integration of market risk and credit risk
How to Study this subject?
This subject is a theory subject with a twist, because even though it comprises of theory it needs you to simply understand and put concepts into words. It needs no expansion of an answer or flowery language to impress the examiner. What it looks out at to test you as a student whether you actually understand what sort of risks prevail in the financial segment of running an organization and how can you ensure that they don’t really hit the organization.
How best you use your safety nets and protection mechanisms to avert these risks and even if the company is faced with a huge hit how can you ensure that it comes back on track without really facing a huge loss in the process.
As students of BFM you are well versed of how the financial markets run, how risks need to be taken and how they impact an organization if the gamble works out or not, this subject helps you understand this process in depth. You need to attend lectures regularly because a textbook can’t possibly tea
ch you the nuances of dealing with risk taking as much as an experienced professor can.
Stage one of dealing with this subject would include you understanding the concepts followed by your application of them while problems arise. This subject will need you to use a lot of your own understanding and derive the solutions that you think best fit into the process.
Instead of treating this subject as one which will give you mark so that you can pass and confine it to a single textbook learning concept, if you actually take interest read a bit about it in the papers regularly and use your understanding to actually solve cases and case studies you might find this as a potential career opportunity.
As far as the practical aspect is concerned, it’s all about practice, practice and more practice. You absolutely cannot live without practicing sums, as they are the ones who will help you score full marks and increase your overall marks in the subject.
How to Crack the Exam?
- Solve the sums regularly to ensure you grab whatever marks you can out of them.
- If you are short on time then you can take up one chapter and identify the different kinds of sums in that chapter.
- Per type solve one sum and simultaneously keep writing down the steps you do so that you know which formula was used when and how a particular calculation was done.
- Once that is done you can repeat the format for one sum from each type of each chapter and revise other sums using the steps written down.
- This is advisable only if you are really short on time and have not studied any sums until the last minute.
- Also, when you solve sums make sure you study the theory and brush up on the concepts alongside the sums so that all of it fits into your head together.
- While solving the paper if you feel that you have forgotten something you can rely on either the practical side or the theory side to come to mind and bail you out in that question.
What sort of a Career is possible post a course in Risk Management?
A lot of colleges in India and abroad offer courses in risk management, so a post graduation course in the same would be an ideal option if you do like the subject enough for making a career in the same. A lot of these courses are related to insurance along with risk management so you can look up your choices accordingly.
A career as a financial risk analyst and financial risk managers are also very well paid and in a lot of demand so if it interests you, there is a lot of possibility for growth in the field!
All the best! Study well 🙂
BY AMI PANDYA