1. NAME OF COURSE  / MODULE RISK MANAGEMENT
2. COURSE CODE MFC4013
3. NAME(S) OF ACADEMIC STAFF  
4. RATIONALE FOR THE INCLUSION OF THE COURSE/MODULE IN THE PROGRAMME This is an additional finance course for the programme. The course is exposing students with principles and techniques in managing risk for financial institutions.
5. SEMESTER & YEAR OFFERED Semester 6 / Year 3 & Semester 7 / Year 4
6. TOTAL STUDENT LEARNING TIME (SLT) Face to face:

L T P O
28 23 8

L=lecture ; T=Tutorial; P=Practical; O=Others (Exam)

Total Guided and Independent Learning:

120
7. CREDIT VALUE 120/40 = 3.00 (3 credit); 2+2
8. PREREQUISITE (IF ANY) MFA2013 Principles of Financial Management
9. OBJECTIVES 1. To familiarize students with the fundamental concepts in risk management in Financial Institutions.

2. To highlight students on the types of risks in financial institutions.

3. To equip students with ample knowledge on how financial institutions should manage those risks.

10. LEARNING OUTCOMES At the end of the course, learners will be able to:

1. Explain the fundamental concepts in risk management. (LO2, P2)

2. Analyze several types of risk in financial institutions. (LO3, CTPS3)

3. Formulate the best technique to manage risk in financial institutions. (LO9-LS2)

11. TRANSFERABLE SKILLS Student should be able to manage risk in financial institutions through a process of lectures, tutorial and group discussion.
12. TEACHING-LEARNING AND ASSESSMENT STRATEGY Teaching-learning strategy:

  • The course will be taught through a combination of formal lectures, exercise, group work, using authentic materials, informal activities and various textbooks. Collaborative teamwork will be fosters throughout the course. The use of examination and internal reporting assessment will assess the student’s ability to apply theoretical concept in context.

Assessment strategy:

  • Formative
  • Summative
13. SYNOPSIS The subject intends to provide knowledge and information on risk management from conventional and Islamic perspective. Students are exposed to the fundamental concepts of risk management. Emphasize would also be given on risk management in the banking industry, risk management and mitigation.
14. MODE OF DELIVERY Lectures and tutorial (SCL)
15. ASSESSMENT METHODS AND TYPES
Component %
Continuous Assessment 50
Final examination 50
Total 100
16. CONTENT OUTLINE OF THE COURSE/MODULE AND SLT PER TOPIC
TOPIC Lecture Tutorial Test/Quiz/Exam Assignment Assessment       (Library Search) Self-study Total
Introduction to Risk Management 2 1 3 6
Risk Management Issues in Islamic Financial Contract 4 3 6 13
Interest Rate Risk 4 3 6 13
Market Risk 2 2 3 7
Credit Risk 4 3 6 13
Off-Balance Sheet Risk 2 2 3 7
Foreign-Exchange Risk 2 2 3 7
Sovereign Risk 1 1 1.5 3.5
Technology and Other Operational Risk 1 1 1.5 3.5
Liquidity Risk 2 2 3 7
Liability and Liquidity Management 4 3 6 13
Continuous Test/Quiz/Assessment 5 10 15
FINAL 3 9 12
TOTAL 28 23 8 0 19 42 120
17. REFERENCES Main reference:

1. Saunders, A. & Cornett, M.M. 2014 (8th Edition). Financial Institutions Management: A Risk Management Approach. McGraw Hill

Additional references:

1.  Ioannis Akkizidis and Sunil Kumar Khandelwal. 2008. Financial Risk management for IslamicBanking and Finance. Palgrave Macmillan.

2. Rania Abdefattah Salem. 2013. Risk Management for Islamic Banks. Edinburgh University Press.

3. John C. Hull. 2010. Risk Management and Financial Institutions. Pearson International Edition

 

Mapping of the course/module to the Programme Learning Outcomes

TOPIC

Contact hours (week)

Lesson Learning Outcome (Students are able to…)

CLO KI Teaching & Learning Activities Assessment Tasks
Introduction to Risk Management

  • Financial intermediaries
  • Financial service industry
  • Risk in financial intermediaries
3 1. Describe the special functions of financial intermediaries and financial service industries.

2. Explain the concept of risk in financial intermediaries.

3. Understand the different concept of Islamic Financial Institutions and Conventional banking.

4. Explain the risk involves in financial institutions based on Islamic and conventional

LO2

LO2

o Lecture

o Library Search (Issues in Risk Management)

·  Feedback on library search
Risk Management Issues in Islamic Financial Contract 7 1. Describe the risk management issues in financial institutions.

2. Explain risk involve in Islamic financial contracts (Musharakah, Mudharabah, Murabaha, Salam, Istisna, Ijarah)

3. Discus risk management issues in financial institutions: Basel ii and iii, IFSB principles of risk management.

LO9

LO3

LS2

CTPS3

o Lecture

o Tutorial activities – exercises

o Library Search

·  Feedback on tutorial activities

Feedback on library search

Interest Rate Risk

  • Repricing model
  • Duration
7 1. Use the repricing model in measuring interest rate risk

2. Analyze the duration model approach in measuring interest rate risk.

LO3

LO3

CTPS3

CTPS3

o Lecture

o Tutorial activities – exercises

·  Feedback on tutorial activities
Market Risk

  • The Risk-metrics model
  • Historic (Back Simulation) approach
  • Monte Carlo simulation approach
4 1. Explain the importance of measuring market risk

2. Compare the three approaches in measuring market risk

LO2

LO3

CTPS3 o Lecture

o Tutorial activities – exercises

·  Feedback on tutorial activities
Credit Risk

  • Default risk model on individual loan
  • Loan portfolio and concentration risk
7 1. Discuss different approaches to measure credit or default risk on individual loans

2. Analyze various approaches to measure credit portfolio  and concentration risk

LO2

LO3

CTPS3 o Lecture

o Tutorial activities – exercises

·  Feedback on tutorial activities
Off-Balance Sheet Risk

  • Off-balance sheet activities and FI solvency
  • Non-schedule L off-balance sheet risk
4 1. Explain the off-balance sheet activities

2. Describe the risks and returns of several off balance sheet items

LO1

LO2

o Lecture

o Tutorial activities – exercises

· Feedback on tutorial activities
Foreign-Exchange Risk

  • Sources of foreign exchange risk
  • Foreign currency trading
4 1. Analyze the sources of FX risks

2. Illustrate possible ways to mitigate FX risks

LO3

LO3

CTPS3

CTPS3

o Lecture

o Tutorial activities – exercises

·  Feedback on tutorial activities
Sovereign Risk

  • Credit risk vs. sovereign risk
  • Debt repudiation vs. debt rescheduling
  • Country risk valuation
2 1. Explain the problems FIs face from sovereign or country risk exposure

2. Evaluate country risk.

LO2

LO2

P1

P2

o Lecture

o Tutorial activities – exercises

· Feedback on tutorial activities
Technology and Other Operational Risk

  • Sources of operational risk
  • Impact of technology
  • Other operational risk
2 1. Explain the main elements in operational risk and identification of operational risk

2. Explain the risks appear from the usage of technology in FIs

3. Compare the impact of technology for wholesale and retail services.

LO3

LO3

CTPS3

CTPS3

o Lecture

o Tutorial activities – exercises

· Feedback on tutorial activities
Liquidity Risk

  • Causes of liquidity risk
  • Liquidity risk in depository institutions
  • Liquidity risk and financial service industries
  • Investment funds
4 1. Describe the causes of liquidity risk faces by FIs

2. Compare and contrast the liquidity risk faces by different FIs.

LO2

LO3

CTPS3 o Lecture

o Tutorial activities – exercises

·  Feedback on tutorial activities
Liability and Liquidity Management

  • Liquid asset management and it composition
  • Liability management and structure
7 1. Construct optimum composition of liquid asset portfolio.

2. Select the most favorable liability structure.

LO9

LO3

LS2

CTPS3

o Lecture

o Tutorial activities – exercises

o Library Search

·  Feedback on tutorial activities

·  Feedback on library search