Financial and Operational Risk Management for Central Bankers
4-day intensive residential programme, 30 August
- 3 September 2004
Venue: Christ's College, Cambridge
Course Director: Peter Nicholl, Governor, Central Bank of Bosnia & Herzegovina
Details of how to register
are here
FINANCIAL AND OPERATIONAL RISK MANAGEMENT FOR CENTRAL BANKERS
Economic uncertainty, financial market risks and heightened expectations and accountability expose all central banks to increased risks. These cannot be avoided. They can however be identified and managed. Many can be measured. Increasingly, central bankers realise that this job, of creating a coherent framework for accepting, understanding and managing risk, is at the very heart of what they do. But it is not straightforward.
This course is designed to help delegates understand and analyse the challenges that central bankers face in managing risk, and demonstrate how some leading central banks have tackled them. At the same time, central bankers face pressures to improve their financial performance. How can central banks maintain and if possible increase returns while delivering improved risk management? That challenge is at the centre of their work - and of this seminar/training course.
Case studies examine how central banks have in practice improved their management of risk. Key sessions will discuss the most effective means of organising and coordinating effective contingency plans to limit the consequences of operational failure or disasters.
The benefits of participation are clear. Experts drawn from a variety of disciplines as well as central banks will lead discussions to enable delegates to compare their central bank's techniques and policy frameworks against those of leading institutions and academic research findings. Presenters will examine in detail how to identify, measure, and manage the most important risks that are faced by today's central bankers.
One particularly important risk will receive special attention. This arises from the fact that historical volatility may be a very poor guide to risks, especially when low measured volatility is a reflection of a particular policy environment. At a time when interest rates/inflation are historically low in many countries, central banks cannot rely on this continuing. How should they prepare their own balance sheet for an upturn in the interest rate cycle?
Delegates benefit from informal and candid discussion of sensitive policy issues with their peers and leading experts. Experienced senior central bankers compare their concepts of "best practice" with those of their counterparts in other central banks and official institutions. At this seminar, delegates can step back from day-to-day pressures and swap experiences and perspectives with contemporaries.
The conference organiser, Central Banking Publications Ltd, is an independent body delivering a range of regular publications, directories, research studies and electronic media services for monetary authorities and financial supervisors worldwide. This independent standpoint naturally encourages free discussion and potentially allows a broader coverage of issues than conferences organised by official institutions. Now in its sixth year, Central Banking Publication's annual training course/seminar series has welcomed over 600 delegates from 95 countries.
We are once again proud to present a distinguished panel of speakers to lead group discussions under my chairmanship. I look forward to welcoming you to Cambridge on August 30th.
Yours sincerely,
Peter Nicholl
Course Director
PS Other training courses are also held in this Autumn Series 2004, for detailed programmes and a fax-back registration form for each course, please visit www.centralbanking.co.uk/conferences.
MEASUREMENT AND MANAGEMENT
Chairman:Peter Nicholl Governor, Central Bank of Bosnia & Herzegovina
Promoting a risk management culture in
a central bank
Peter
Nicholl
Governor, Central Bank of Bosnia & Herzegovina
Risk management does not stand still. On an ongoing
basis, central banks must identify emerging risks, whether they arise
from financial market developments, technological innovation or political
uncertainty. In this session group members will describe the pressing
risk management problems they currently encounter, and how they and
their institutions have gone about addressing them. They will then compare
results achieved.
Managing reputational risks and relations with governmental institutions
Peter
Bakstansky
Senior Vice-President, Federal
Reserve Bank of New York
A central bank's most valuable asset is its reputation.
Presenting and explaining policy is essential for establishing and maintaining
credibility. A commitment to transparency and accountability is a prerequisite
for a modern independent central bank, but can this on occasion conflict
with the need to enhance credibility? How can central banks manage reputational
risk? Here delegates will benefit from the perspective and knowledge
of one of the most experienced experts in public information in the
central banking community.
Comprehensive identification of risk
Speaker to be confirmed
A rigorous means of risk identification is essential
to ensure comprehensive coverage and awareness of risks on a bank-wide
basis. An effective approach must start with a regular process for identification
and categorisation of risks, but must also allow adaptation and innovation.
Speakers from leading central banks will discuss techniques such as
risk mapping and the use of a "risk matrix" as tools in this process.
Organising the risk function in the central bank
Carlos Bernadell
Head of Middle Office, European
Central Bank
Kristina Åkerberg
Head of Risk Management, Sveriges
Riksbank
The risk management system must address the unique
situation of each central bank, its environment, and the measures available
to balance effectively the achievement of objectives and the risks incurred.
What are the essential components of a risk management system for a
central bank's operational framework? How have systems been adapted
to meet new and emerging risks? How do different risk management techniques
impact on the systems needed to support the operations? The session
will examine the key features of a risk management system in a central
bank. The group will discuss the extent to which central banks can learn
from the commercial sector and the arguments for and against a decentralised
system of risk management.
Jan Schmidt
Head of Risk Management, Czech National Bank
Central banks are under pressure to maintain the returns on their reserve portfolios, at a time when yields on traditional assets are at historical lows. Yet diversification presents new risks. The speaker discusses how the governance and strategies of the reserves and risk management function have evolved in line with developments in financial markets. He also explores the suitability of the latest portfolio techniques for reserve management at central banks generally. The group will discuss how central banks may sustain their performance, whilst paying adequate attention to liquidity and security.
New developments in risk management at the Bank of England
Paul Chilcott
Head of Risk Analysis and Monitoring Division, Bank of England
Paul Chilcott will elaborate on the Bank of England's approach to understanding the types of risks to be confronted: including market, credit, liquidity and operational risk. He will discuss the control processes used to manage risks and the methods by which these are monitored. In particular the session will explore development of the benchmark allocation.
The problem with reserves accounting
John Nugée
SSgA and former Head of Reserve Management at the Bank of England
This session examines some of the practical consequences of applying accounting standards to reserve portfolios, including examples where the result may not be entirely as expected or desirable from a reserves management point of view. A general discussion will cover topics raised in the presentations, as well as the role of capital and reserves in absorbing residual risks that are not fully hedged or transferred to ensure financial independence. How should central banks value balance sheet items, and feed that valuation into a risk management framework? If central banks' policies affect the behaviour of financial market instruments, such as government securities held by them, are conventional accounting valuation rules appropriate?
The application of accounting and financial reporting procedures
Speaker to be confirmed
Effective governance is a key component of managing reputational risk and operational effectiveness. Yet central banks remain far from consistent in applying accounting and reporting standards. The speaker looks at where central banks fit within this trend, particularly in the area of the management of foreign reserves and the requirements of international accounting standards.
Why central banks need financial strength
A roundtable discussion led by Peter Nicholl
Low returns on assets have reduced central banks' income; a return to higher yields threatens their solvency. Yet the diverse nature of a central bank's functions means that there is no definitive answer as to what constitutes capital adequacy. This session, in the form of a roundtable discussion led by Peter Nicholl, will discuss central bank balance sheet strength: how a central bank's solvency affects its independence, the central bank's role in managing risks on the national balance sheet and the question of how much capital a central bank needs and methodologies for calculating this.
Establishing a culture of
operational risk governance
Jens Ulrich
Bank for International Settlements
Designing, implementing and testing effective contingency plans
Elizabeth Kent
Manager, Business Continuity Division, Bank of England (invited)
In 2004 no central bank is unaware of the requirement that all key business areas be included in effective contingency plans. But these plans must be backed up by efficient management structures to deliver them. What systems are necessary to maintain central bank services in order to preserve confidence in local and international markets? This session outlines approaches to systems design and procedures for disaster planning.
The role of contingency planning
A roundtable discussion led by Peter Nicholl
Whether planning to maintain business continuity in the face of catastrophe, or working to resolve day-to-day operational risk issues, risk management planning is necessarily limited. In order to avoid triggering disaster, risk managers cannot "pull the plug" to test continuity plans. In this context it is more valuable than ever for risk managers to be able draw on each other's first-hand experiences of different risk scenarios. This session will examine the experiences of the group in the area of contingency planning and operational risk management.
The role of the risk audit
Roy
Laverick
Consultant and former IT audit manager at the Bank of England
This session will examine the role of the auditor
in the risk management process. How can auditors determine the cost-effectiveness
of the controls in place? The presentation will address the key considerations
for central bank audit and, in the form of a case study, present the approach
of a central bank to these challenges. How can "best practices" and standards
lead to the reinforcement of the role of internal audit in central bank
governance?
Mitigating personnel risk
A roundtable discussion led by
Peter
Nicholl
As public sector organisations operating in financial
markets central banks face particular challenges in attracting
and retaining key personnel. But reliance on key individuals is a risk
in itself. Peter Nicholl will lead a discussion on how central bank management
can deploy staff resources to ensure continuity of performance. This session
will also address the practicalities of designing an effective and workable
code of conduct for central bankers as a means of safeguarding the central
bank's reputation and protecting its employees.
How comprehensive risk
management adds value
A roundtable discussion led by Peter
Nicholl
Effective risk management can shine a light on all an institution's business
areas and processes. When undertaken proactively, risk management can
be a powerful force in strengthening not only the central bank itself,
but also the national economic infrastructure as a whole. This session
assesses the comprehensive potential impact of a central bank's risk management
framework. How, for instance, can better risk management contribute to
a country's creditworthiness in financial markets? How can performance
be measured and enhanced?
The course will conclude with a group
discussion rounding up lessons of the week.
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