Risk Identification, Measurement, Monitoring and Control

Manajemen risiko Program Magister Akuntansi Universitas Trisakti

Preapred by Zainul Arifin

Tujuan Pembahasan

Menjelaskan proses manajemen risiko Menjelaskan teknik yang digunakan untuk mengukur, memantau dan mengendalikan risiko kredit, risiko pasar dan risiko likuiditas.

Risk Management Process

Identify Risk

Monitor Risk

Quantify Risk

Control Risk

Blue Mountain Inc. (2005)

Identify Risk

Bank harus mengidentifikasi semua risiko yang dapat berdampak pada bisnisnya. Bank harus mensegmentasikan risiko-risiko itu ke dalam segmen-segmen yang terpisah satu sama lain secara kumulatif lengkap dan mendalam.

Blue Mountain Inc. (2005)

Bank Risk Segmentation

Credit Liquidity Compliance
Retail Sovereign Corporate Internal Fraud External Fraud Work Place Client Product Business. Business Disruption Physical Damage Execution Delivery FX/IR/Commodity/Equity Theft / Fraud -Theft -Forgery System -Hacking -Info Theft

Operational
Reputation Legal

Market
Strategic
Blue Mountain Inc. (2005)

Quantify Risk

Qualitative Analysis Quantitative Analysis

Qualitative Assessment

Deskripsi dari type-type risiko yang dihadapi bank dan yang berhubungan risk management process. Misalnya Pengungkapan kualitatif yang diharuskan oleh Basle II Pilar III: Untuk setiap area risiko, bank harus mendeskripsikan kebijakan menejemen risiko termasuk: - Strategi dan proses - Struktur organisasi - Ruang lingkup pelaporan - kebijakan lindung nilai / mitigasi risiko
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Quantitative Assessment

Mathematic assessment of the risk Market Risk (per asset class):

Liquidity mismatch/gap analysis Value at risk (VAR) analysis

Credit Risk (per credit portfolio)

Probability of Default Exposure at Default Loss Given Default Maturity

Blue Mountain Inc. (2005)

Quantify Risk

Easier to quantify:

Credit Market Liquidity Operational Legal Compliance Strategic Reputation

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Harder to quantify:

Blue Mountain Inc. (2005)

Monitor Risk

Setiap program manajemen risiko harus secara berkesinambungan ditinjau dan diperbaharui. Manajemen bertanggung jawab untuk memastikan bahwa standar minimum telah diikuti dan standar maksimum dicapai seoptimal mungkin. Bila ditemukan sesuatu yang tidak direncanakan, maka program tersebut harus dihentikan dan dievaluasi.

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Control Risk

Control Risk adalah bagian dari proses manajemen risiko yang aktual. Risk management process dapat dibagi ke dalam dua bagian yaitu:

Risk Information: informasi yang diperlukan untuk membuat risk control decision, Risk Control: Tindakan manajemen risiko untuk melakukan control risiko
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Risk Management Process

Risk Information
Idntify Risk Quantify Risk Monitor Risk

Risk Control
Risk Control Action Control Activities

Risk information provides the support for risk control decisions/actions

Blue Mountain Inc. (2005)

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Risk Control Actions

Risk Control Actions : Actions/decisions which are implemented in response to the identified risk Control Activities: Procedures and policies which are put in place to help control risk.

Blue Mountain Inc. (2005)

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Risk Control Actions

Terminate Risk Take Risk Treat Risk Transfer Risk

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Terminate Risk

Take an action that will limit, prevent and even reduce the risk The risk is too great for the bank. For example:

Decline a credit proposal to limit credit risk to an obligor Decline a product launch because of high operational / reputation risk Demand that a trader close his position to reduce market risk

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Take Risk

Accept the risk in its current state and monitor it These are the risk that are not too significant and we are willing to accept it. For example:

Accept a credit proposal is. Accept a request to increase a traders limits.

Blue Mountain Inc. (2005)

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Treat Risk

The bank takes the risk but modifies the transaction and improves the response to reduce probability of event or magnitude of lost BIS II is designed so that banks treat better and more of its risk

Blue Mountain Inc. (2005)

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Treat Risk

In credit risk this could be:

Changing the term of the loan: shorten tennor/collateral etc. Institute an early warning system of credit deterioration for name/industry etc. Portfolio management of credit risk

In operational risk, this could be:

Key Risk Indicators Company Loss Database

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Transfer Risk

Bank takes the risk but enter into agreement with a third party (its borrowers, insurers, subcontractors, service/product providers etc..) to share, transfer or insure this risk.

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Control Activities

Policies and procedures to help manage risk Examples could be:

Market risk:

Trading/VAR limits Limit approval process Lending/credit limits Credit approval process.

Credit Risk:

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Risk Management Process

Identify Risk
Identify Segmentation

Monitor Risk
Risk Update Timely

Quantify Risk
Qualitative Assessment Quantitative Assessment

Control Risk
Risk Control Action Control Activities
Blue Mountain Inc. (2005) 21

Risk Measurement
Credit Risk
Probability of Default

Credit Rating Model

Qualitative Factors Business Risk Management

Quantitative Factors Financial Information Balance Sheet Profit and Loss Cash flow

S C Learning Limited (2005)

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Risk Measurement
Credit Risk Grades and Probability of Default Probability of Default (%) 12.00% 10.00% 8.00%

6.00%
4.00% 2.00% 0.00%

A+

BB+

AAA

BBB

B+

AA

Credit Risk
S C Learning Limited (2005) 23

Risk Measurement
Other factors affecting Credit Risk

Exposure at Default (EAD) Loss Given Default (LGD) Expected Loss

S C Learning Limited (2005)

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Risk Measurement

exposure at default (EAD): jumlah eksposur yang diperkirakan masih tersisa (outstanding) pada saat obligor / guarantor dinyatakan default; loss given default (LGD): estimasi jumlah kerugian yang dapat terjadi jika obligor / guarantor mengalami default; maturity: berkaitan dengan jangka waktu eksposur. Semakin panjang waktu penyelesaian ekaposur akan menimbulkan risiko maturity yang makin besar. Expected Loss: is a function of PD, EAD and LGD and is calculated as follows:-

Expected Loss = PD(%) X EAD (Rp amount) X LGD(%) plus a weighting for maturity
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Risk Measurement
PDs, EADs and LGDs are estimated through:

Accurate and consistent credit analysis and application of loan grades Gathering, analysis and modeling data collected over several years Comprehensive validation and results Analysis of correlations and results
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S C Learning Limited (2005)

Risk Monitoring and Control

Credit Risk

Limits Excess Reporting Portfolio Reporting Stress testing Frequency

S C Learning Limited (2005)

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Risk Measurement
Market Risk

Measured using sophisticated models Risk measures can be grouped into three categories:

Sensitivity Volatility Downside risk

Stress tests
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S C Learning Limited (2005)

RSA dan RSL

Aset / liabilitas disebut Rate Sensitive Assets (RSA) / Rate Sensitive Liabilities (RSL) bila: Pendapatan atau biaya mudah berubah-ubah mengikuti perubahan tingkat bunga pada suatu periode (time horizon) tertentu atau cash flow mudah keluar-masuk, jika terjadi perubahan tingkat bunga atau repriceable, mengikuti perubahan tingkat bunga
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Fund Gap FGAP = RSA - RSL

RSA RSL
RSL
gap

RSA gap FRA

RSA

RSL

FRA

FRL

FRL FRA

FRL RSA<RSL
NEGATIVE GAP
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RSA=RSL GAP = 0 MATCHED

RSA>RSL POSITIVE GAP

Fund Gap FGAP = RSA - RSL

Bila tingkat bunga cenderung naik, maka FGAP positif adalah menguntungkan Bila tingkat bunga cenderung turun, maka FGAP negatif, akan menguntungkan Bila FGAP = 0 maka kenaikan atau penurunan tingkat bunga tidak akan berpengaruh terhadap value of net worth.

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Risk Monitoring and Control

Market Risk

Limits Limit Excess Reporting Requirements Stress Testing

S C Learning Limited (2005)

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Risk Measurement
Liquidity Risk
Liquidity risk arises as a result of liquidity imbalances in a banks balance sheet. Possible causes are: Loan growth outpacing deposit growth deposit growth outpacing Loan growth Mismatch in the maturity profiles in assets and liability products Mismatch by sector between source and use

S C Learning Limited (2005)

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Risk Measurement
Repayment Gap Analysis
Repayment gap analysis can be used to identify liquidity imbalance in a banks balance sheet

S C Learning Limited (2005)

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Risk Measurement
Repayment Gap Analysis An Example
Suppose a bank lends a corporate USD 100m for one year at an interest rate resetting to LIBOR every 3 months. The banks then borrows USD 100m for 3 months to fund the loan for the first three months and then continues to borrow in this manner every three months until the loan matures.

S C Learning Limited (2005)

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Risk Measurement
Repayment Gap Analysis An Example
The repayment and repricing tables for the loan would look like this:
REPAYMENT ON ON1mth 1-3 mths - 100 ON ON1mth 1-3 mths 100 - 100 3-6 mths 6-12 mths 1-3 yrs 3-6 mths 6-12 mths 1-3 yrs

Loan to corporate
Funding for loan REPRICING Loan to corporate Funding for loan

100

S.C. Learning Limited (2005)

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Risk Measurement
Repayment Gap Analysis An Example

The loan result in a liquidity mismatch, but no interest rate mismatch This gap analysis can be done for all products cumulatively to get a picture of the mismatches in the whole balance sheet These mismatches give an idea of potential sources of liquidity risk
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S C Learning Limited (2005)

Risk Measurement
Liquidity Gap Analysis

If the cumulative net liquidity mismatch is positive then there is forecast to be a net cash inflow in that time bucket. In other words, there is no liquidity risk. If the cumulative net liquidity mismatch is negative then there is forecast to be a net cash outflow in that time bucket. This means there is a liquidity shortage, and shows that the bank is exposed to liquidity risk.
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S C Learning Limited (2005)

Risk Monitoring and Control

Liquidity Risk

Gap analysis provides an overview of cash inflows and outflows and thereby provide a means of monitoring liquidity mismatches Usually distinguishes between inflows and outflows of on and off balance sheet items and sources and uses of liquidity e.g. the capacity to lend or borrow from wholesale markets and the sale or purchase of marketable securities. Liquidity management requires the appropriate balance to be maintained between these components to ensure the bank has sufficient liquidity available to meet its obligations as they fall due.

S C Learning Limited (2005)

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Risk Monitoring and Control

Liquidity Risk

Liquidity risk is controlled using a series of limits and guidelines Different mechanism are used to manage medium term, short term and intra-day liquidity risk.

S C Learning Limited (2005)

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Risk Monitoring and Control

Liquidity Risk
control mechanism for the medium term include:

Advance/deposit ratios Medium term funding ratios Commitment guidelines Swapped funds Optionally
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S.C.Learning Limited (2005)

Risk Monitoring and Control

Liquidity Risk
control mechanism for the short term include:

Maximum cumulative outflow Wholesale borrowing guidelines Marketable securities

S C Learning Limited (2005)

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Risk Monitoring and Control

Liquidity Risk
control mechanism for intra-day risk include:

Internal limits Use of external payment system

S C Learning Limited (2005)

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Summary

We have talked about measuring risk, which are some of the measures used for the various areas of risk? What are the tools that can be used to monitor and control risk?

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