Tools for Risk Management, Spring 2024

In this exercise, you will use one of two risk tools to create a risk model to solve a problem, implement the model or risk assessment, capture data, and create reports.

• Option 1 - Operational Risk problem in Archer

•    Create Dashboard

•    Build Risk Assessment Questionnaire

•    Populatedata

•    Create Reports

• Option 2 - Market Risk problem in Beacon

•    Develop a new instrument (e.g. option or bond) class using Beacon IDE

•    Create some positions in a book

•    Capture some risk analytics on the book of positions

Archer - Operational Risk Problem

You will define a realistic risk problem and create a bottom-up risk assessment of one these domains:

•    Devices – technology devices

• Facilities – business locations

•   Applications - software

•    Business Processes – operational steps used to get business done

For example, HypoBank has a regulatory requirement to ensure that business processes supporting risk reporting are materially automated, supervised appropriately, and the data is captured and traceable. Multiple business processes will be examined using the same set of questions.

Another example is that all HypoBank facilities must be well secured with card entry, access only to appropriate areas, all entry/exit logged, public areas monitored, and supervised around the clock. Multiple facilities will be examined

For the chosen risk problem, you will document the requirements, create a risk assessment, capture data, and create reports highlighting any issues.

The business requirements will include the problem statement and the list of questions and “correct” (low-risk) answers.

IMPORTANT: this is a BOTTOM-UP risk assessment. You need to create a questionnaire that the will be answered by the “owner” of each item in the domain.

Your risk problem should be amenable to a bottom-up solution across these domains. Each item in the domain will have a calculated inherent risk.

You should have 8- 15 items in the domain and 10-20 questions in the questionnaire to generate interesting data.

Be creative! Come up with some realistically complex scenarios.

Beacon - Market Risk Problem

You will create a class that models a new financial product (for example an option or bond). You will capture some positions and create reports to show the risk impact of the positions.

You will be provided a login to the toolselected, documentation, and instructions on how to implement these processes.

More information will be provided as needed. I expect a lot of questions but look into the documentation and examples before raising issues.

Artifacts

•    Statement of Problem

•    Requirements and approach (word document) (DRAFT and FINAL)

•    Clear and detailed description of the risk problem

•    Business Requirements (DRAFT and FINAL)

•    Concise and complete business requirements for model/assessment and reports

•    Implementation (code / configuration in Beacon / Archer)

•    Implementation consistent with style of examples

•    Clear code / configuration logic

•    Logical user interface and clear reports / outputs

•    Works as specified

•    Presentation of reports and results (PowerPoint)

•    Clear statement of risk problem

•    Quantitative assessment

•    Description of data captured

•    Clean and intuitive reports

•    Qualitative assessment of the results

•    Evaluation of the risk and potential mitigants

Rubric

This is 25% of the final grade (250 points out of 1000). For this project, the grades will be based on:

•    Demonstrated understanding the Risk Problem – 40%

•    Demonstrated understanding the Tool – 40%

•    Artifacts follow best practices (professional, clear, concise) – 20%