Study programme

This Master’s programme takes its own unique approach, incorporating aspects of other disciplines such as organizational science and behavioural studies, in addition to economic and mathematical modelling, scenario analysis and stress testing. The programme’s practical approach features case studies and risk management games that bring the theory to life. As a result, you will be able to apply the knowledge you acquire directly to your own organization.

SUBJECTS

  • The history of risk and risk management. Learning from systematic, recurring errors during economic cycles to prevent the same mistakes in future.
  • Dimensions of uncertainty and how they translate into potential risk sources (e.g. market and credit risk, operational risk, counterparty risk, compliance risk).
  • Qualitative and quantitative risk measurement and risk management methods, from stress testing and VaR, to Enterprise Risk Management.
  • The operations of financial institutions (i.e. banks, insurers, pension funds, asset managers and their products) and the financial markets on which they operate.
  • Frameworks and conduct guidelines used to regulate financial markets and manage risk (e.g. Basel, Solvency).
  • Cognitive psychology: human choices in uncertain situations and relevant aspects of risk management.
  • Games, cases and essay writing to develop research skills, formulate strategies for dealing with internal resistance and adopt better risk management methods.

SEMESTERS

What is risk and what is risk management? How are risks identified, described and calculated? Why are existing methods of risk management used and how were they developed? By answering these questions you will deepen your understanding and find ways to improve current methods and techniques.

In the second part of the semester, you will use case studies to examine archetypes of various financial institutions and explore the business models they employ. This allows you to construct a framework for analysing risk management and formulating new risk management ideas in your own organization.

SUBJECTS DISCUSSED:

Introduction to risk management

  • Philosophy of risk and uncertainty
  • Sources of uncertainty and risk
  • Financial markets: dynamics, supply, demand, liquidity, value and price
  • Statistical calculations of uncertainty, reliability and relativity of statistical data
  • Introduction to methods of risk calculations, control and management
  • Financial institutions: archetypes, balance sheet characteristics and management
  • Characteristics and dynamics of banks, insurance companies, pension funds and asset managers
  • Set-up of financial institutions: strategy and policy
  • Relationship and interaction between strategy, policy, product development and risk profile
  • Recent successes and shortcomings of financial institutions
  • Exploring and solving risk problems for financial institutions

In this semester, you will explore possible strategies for the financial institution archetypes discussed in Semester 1 with a view to determining an institution’s products, services and operations. A strategy is based not only on internal reasoning but also on external factors such as the regular introduction of new regulations and frameworks. You will engage in extensive discussions on how these factors influence business strategy and the selection of risk management techniques. You will examine the strengths and weaknesses of modern instruments, with current case studies to help you apply your newfound insights.

SUBJECTS DISCUSSED:

Enterprise Risk Management

  • COSO II and Enterprise Risk Management (ERM)
  • Measuring risk, risk control and risk management at a financial institution
Management of a financial organization
  • Policy check; management models
  • Product development and the relationship to operational risks
  • Administrative organization and internal audits
  • Business support: IT, back office, sales and marketing
  • Scale and controllability of an organization

Market supervision of financial institutions

  • Market supervision and surveillance: the role of supervisors and rating agencies
  • Features and implications of FIRM (Financial Institutions Risk Method)
  • Features and implications of ICAAP (Internal Capital Adequacy Assessment Process), Basel and Solvency

Case studies

  • Designing anti-cyclical regulations
  • Implementation of ERM / the COSO framework

Risks faced by financial institutions with their trading books and investments, largely determine their material impact. That’s why this programme equips you with a deeper understanding of market risk, budgeting and risk category allocation, which all feature as recurring themes. If you are able to identify and gauge the scope of significant risks, you can harmonize them with the institution’s risk capacity. Derivatives are an important tool in achieving this objective.

SUBJECTS DISCUSSED:

Finance & Investments

  • Balance sheet management and ALM applications at financial institutions
  • Derivatives, valuation and use in portfolio & risk management
  • Tracing, measuring and controlling embedded options in the balance sheet of financial institutions
  • Financial markets and specific risk aspects in submarkets

Case studies 

  • Solvency and liquidity management
  • Hedging embedded options in balance sheets of financial institutions
  • Derivatives studies

The dominant neoclassical assumption that economics is shaped by rational decision-makers aiming to maximize utility has been seriously undermined by world events. That is why, in the search for new theories of information processing, pricing, yield dynamics and risk management, you will focus on behavioural finance: modern psychological and sociological insights into human action and decision-making.

The history of financial markets and instability theory will also feature regularly, as you study the implications of human conduct in current case studies and explore the lessons learned from the rich history of risk management. How can we chart risks and prevent adverse effects for an organization? Where should our focus lie?

SUBJECTS DISCUSSED:

Behavioural economy

  • Taking decisions in uncertain situations: theory and practice
  • Group decision-making: instinct versus rationality
  • Cognitive emotional processes and systematic errors in assessments
  • Implications of cognitive and social processes for measuring risks
  • Implications of cognitive and social processes for interpreting and managing risks
  • Influencing choice of architecture to prevent mistakes

Financial markets and event-risk approaches

  • History of financial markets and crises
  • Instability theory and scenario approach
  • Processes to set up event-risk scenarios and stress-test approach
  • Robust decision-making processes in high uncertainty

Risk management in practice and final case study

  • Applying behavioural finance and event-risk approach in context of risk methodologies, risk control and risk management in financial institutions
You fulfil the thesis requirement by writing a portfolio of four essays, starting in Semester 2 and ending in Semester 5. You will write the first essay individually, the next two in groups, and your final essay will also be an individual assignment.

The first three essay topics reflect the learning objectives and are set by teaching staff based on the current programme. For the final essay, you will be given a choice of topics in line with RMFI’s multidisciplinary approach. You can also ask to write the essay on a subject of your own choosing, as long as you substantiate your choice.

You will have the guidance of an essay coordinator who can coach you and make sure your essays meet the required academic standard.

Dividing the thesis requirement into a four-essay portfolio helps you connect with various aspects of risk management clearly and accessibly, while making your overall workload more manageable as you combine part-time academic study with the demands of you personal and professional life. Semester 5 also features a ‘wrap up’ of materials discussed in the preceding four semesters. Participation is mandatory, but there is no exam.