Financial risk management refers to the process by which companies identify potential risks with respect to its finances, analyze them and draw up precautionary measures and strategies to avert or minimize such risks. It is essential in banks, non-banking financial institutions and corporate houses. A financial risk manager is a certified professional who has expertise in market, investment, credit and operational risks that companies may face and tools for their effective management. FRMs are important people in an organization with their unique skill set and knowledge.

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What does a Financial Risk Manager Do?


Design risk management process:

The most important function of a Financial Risk Manager is the designing of a comprehensive risk management process, procedures and policies of an organization. They also plan and execute strategies for risk management.


Methodology for risk identification, assessment and analysis:

The FRM identifies potential financial risks facing the organization and analyzes the possible impacts. For this purpose, they draft a clear and holistic methodology for risk identification, assessment and analysis. The assessment and analysis should be able to show the depth and magnitude of risks as well as estimate the costs for the organization. The FRM may choose to develop software/ computer programs or use statistical methods for assessment.


Also Read: Risk Management and Its Importance


Risk evaluation and budgeting:

The intensity and magnitude of the risk needs to be evaluated and based on the organization’s risk management policies, certain guidelines for minimizing/ averting risks or easing the impact it creates and legal & relevant authorities’ guidelines will have to be followed in terms of insurance, costs, legal requirements, environmental regulations and so on. These elements must be carefully budgeted. The organization’s previous handling of risks will also have to be evaluated and taken into cognizance. The FRM does all of this.


Establish risk appetite:

The FRM is responsible for establishing the level of risk the organization is willing to and prepared to take; establishing an organization’s risk appetite.


Contingency plans and precautionary measures:

The FRM puts in place sound contingency plans and precautionary measures based on assessments and evaluation of the risks both internal and external (global, national, local). They plan and purchase insurance, put together health and safety measures, and prepare business continuity plans with a focus on minimizing business risk.


Risk reporting and record maintenance:

The Financial Risk Manager prepares customized reports regarding various aspects of risks including assessment of depth and magnitude, nature, probable consequences, budgeting, costs, insurance, etc. based on the needs of different groups of stakeholders. They maintain records of insurance policies, risk experiences, claims and loss experiences.



Being specialists in financial risk, FRMs play a major role in the review of legal documents, contracts, policies, new activities and programs, etc. They examine these to find the scope of losses, insurance and other financial implications.


Proposal development:

They aid in the preparation of proposals with their skills in forecasting trends and risks involved, and accordingly accommodating these in the proposal.


Financial risk management course and certifications equip individuals with all the knowledge, skills and tools to become a Financial Risk Manager.

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Risk quantification has emerged as a very important component to a firm’s financial well-being. This course provides training on the usage of tools used in quantification of financial risk (including market risk, credit risk and operational risk) and problems related to financial risk management. The financial risk management course is full of hands-on and implementation of tools and techniques using recent market data. 

The course will provide the practitioner’s perspective in measuring various kinds of financial risks. It attempts to strike a balance between institutional details, theoretical foundations, and practical applications. The course will extensively make use of MS Excel and R.


At the end of the course, participants are expected to understand:

  • How to quantify financial risk as a number with perspective of measuring it
    • What is Value-at-Risk (VaR) and Expected Shortfall (ES)
    • How to estimate VaR and ES (using Historical Simulation, Monte Carlo Simulation, GARCH, EGARCH, GJR-GARCH and other GARCH family models, Range based models, Extreme Value Theory) of single asset, portfolio and single asset influenced by many factors using various tools


  • Basics and implementation of estimating VaR for the fixed income security
  • Basics and implementation of estimating VaR for the financial derivatives (options)
  • Basics and implementation of estimating VaR from perspective of credit risk measurement (CreditMetrics)
  • How to measure credit risk
    • Probability of default/expected default frequency and to estimate it
  • Basics of estimating VaR from perspective of operational risk
    • Aggregate Loss Distribution/Loss Distribution Approach
  • Liquidity risk.


The primary method of instruction will be through LIVE lectures that will be delivered online via internet to participant desktops/laptops or classrooms. The lectures will be delivered by eminent faculty from IIM Kashipur and expert(s) from industry. The course will be primarily taught through a combination of class exercises, presentations, take-home exercises, simulation and case studies. The course contents are organized in a way so as to provide the participants an introduction on application of analytics to various business aspects, followed by concepts of machine learning and their business applications and finally on leveraging big data technologies for analytics.

All enrolled students will also be provided access to the Cloud Campus through which students may access other learning aids, reference materials and assessments, case studies, projects and assignments as appropriate. Throughout the duration of the course, students will have the flexibility to reach out to the Professors, real time during the class or offline via the Cloud Campus to raise questions and clear their doubts. Participants successfully completing and submitting the assigned project work and presentations will be awarded a Certificate of Completion.


Also Read: Career Opportunities In Risk Management


The Executive Development Program in Applied Financial Risk Management will include lectures and learning material on the following topics. 

Module 1: Basics of Financial Risk Management and Fundamental Probability Theory, Brief Overview of Financial Derivatives

Module 2: Market Risk Analysis for single asset: Non-parametric and parametric approaches to estimate VaR and Expected shortfall

  • Historical Simulation, Monte Carlo Simulation, RiskMetrics, GARCH, EGARCH, GJR-GARCH and other GARCH family models, Extreme Value Theory
  • VaR Evaluation: Backtesting

Module 3: Market Risk Analysis: For portfolio and an asset influenced by various factors

  • Standard Covariance/Correlation approach, RiskMetrics, Monte Carlo Simulation, Multivariate GARCH, VaR of factors

Module 4: Risk Measurement in Fixed Income Markets

  • Duration based partial revaluation approach (Historical Simulation), Cash Flow Mapping

Module 5: Credit Risk Measurement

  • Introduction to credit risk, Default Risk, Managing credit risk, CreditMetrics, Default probabilities, Agency ratings, Credit scoring and Internal rating models, Structural models for credit risk (Merton, KMV), Reduced form models, Logistic model for loan default evaluation

Module 6: Operational Risk Measurement

  • Introduction to operational risk with evidence of operational failures, Estimating VaR for operational risk (Aggregate Loss Distribution/LDA) using Monte Carlo Simulation, Operational risk management framework, Operational risk process models
  • Basics of Liquidity Risk – Liquidity Adjusted VaR under normal and stressed market

Module 7: Asset Liability Management in Banks – BASEL I, II and III

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More Information:

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Best Financial Risk Management Course To Excel

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Applied Financial Risk Management: Covering the Basics

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