Risk-Model & Control Auditing

– systematic support in the quantitative examination of risk models and control systems –

Objective:

Strong quantitative capabilities often are required for the examination of risk models and risk-control mechanisms. This particular consultancy module supports clients in the audit of all five inherent risk classes and their respective sub-risks:

  • Market-price risks
  • Liquidity risks
  • Default risks
  • Operational risks
  • and Strategic risks

For example: Issues regarding the appropriate method for measuring one of the most important types of risk – credit or default risk – are receiving increased emphasis. This is due, not least, to regulatory banking measures such as Basel III, the German Solvency Regulation (Solvabilitätsverordnung = SolvV), Germany’s “Minimum Requirements for Risk Management” (Mindestanforderungen an das Risikomanagement = MaRisk) as well as significant repercussions from the financial crisis.

Various methods for gauging credit risk – for example, so-called credit metrics, the model developed by Michael B. Gordy from the U.S. Federal Reserve’s board of governors as well as spread models – have evolved as measurement standards.

Course participants acquire an understanding of various practical methods for measuring credit risk both on the basis of counterparties as well as portfolios. Beyond that, participants receive comprehensive insight into methods for estimating risk exposure. In their role as auditors, participants also are capable of entering into in-depth topic-related discussions on equal terms with the units that are to be examined. ARC instructors provide support and training to enable clients to audit risk models in respect to compliance with legal, regulatory and company-focused guidelines. The yardstick for risk-oriented evaluation on which the training team orients itself consists of the respective national regulatory standards and best-practice guidelines applying to the particular branch of business branch in focus.

Topics:

  • A summary of potential regulatory demands with respect to state-of-the-art audit procedures
  • Current adjustments to methodic approaches within the respective inherent risk class and in accordance with Basel III: market-price risks, liquidity risks, default risks or operational risks
  • Methods of financial supervisory authorities for measuring individual risk categories
  • Elementary considerations with regard to the measurement of exposure
  • Actuarial fundamentals related to risk models
  • The statistic foundations of risk models with regard to a portfolio analysis
  •  Summary of the various conventional risk models
  • The Monte Carlo approach to measurement, for example, of credit exposure
  • Insight into a default-mode model
  • Insight into an asset-value model
  • Sample calculation, for example, in credit metrics
  • Basic considerations with regard to back-testing
  • Practical examples and case studies derived from audits
  • Detailed implementation options for practical application by course participants

Training Team

Audit Championship

Audit-Championship is a university spin-off. We focus on networking between science and practice. Audit-Championship provides thought leadership and innovative methods to support its customers across all industries in digital transformation. We support audit departments globally as well as national Internal Audit associations with yearly 1.800+ training days and transformation services along an internal audit knowledge value chain.

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