Effective Middle Office Management

Course Overview This intermediate-level training course will assist you in defining the role of the middle office in your organisation. Delegates will be taught how to identify risks and how to introduce simple mechanisms to monitor, analyse and control, without the need for high investment in technical equipment and systems. They will be introduced to the generic nature of products and leave the course with the ability to understand their evolution and the purposes for which they were created. This will greatly enhance the ability to control exposures on new products and improve profitability. The course is highly interactive, with group exercises and individual counselling is provided where appropriate. Featuring how to: Construct an effective middle office which will provide the catalyst for coordination and control within an ERM culture. Establish a complete systematic control and management programme suitable for all environments. Create a pre-emptive control strategy and reduce your risks, costs and errors. Introduce properly focussed information and accounting systems to report and control risk. Prepare properly for new products and initiatives through a New Products Steering Committee. Use your middle office as a training ground for risk control and front office professionals. The practitioners guide to achieving a successful and effective middle office. Many institutions have developed middle office functionality as a financial risk and analytical area, but there is a higher need for a coordination and management function that brings together all of the elements, including environmental and operational, so they can be managed in a consistent and cohesive way. This course will illustratehow this can be achieved, without major changes in structure and cost. The leading international training course on middle office activities. This course is delivered by an experienced practitioner with many years of practical experience in middle office and risk control activities. It has been presented, with great success, to delegates from a wide variety of backgrounds and coming from over 70 countries internationally. The course uses a very practical approach to the establishment and use of an effective middle office and counters the often over technical, “paralysis by an analysis” approach, taken by many organisations, which has been wholly ineffective in preventing the major banking losses of recent years. A simple analysis of why difficulties have occurred leads us to conclude that the same generic problems were evident in each case. Detection and prevention could easily have been achieved with a simple systematic control process addressing these basic elements. You will be surprised to learn how easy it can be to identify and control these aspects, using a properly trained, experienced and well motivated workforce. Who should attend Middle Office and Risk Managers. Senior and Middle Management. Operations Managers. Financial and Product Control Staff. Treasury Managers. Auditors and Internal Control Officers. IT and EDP Operatives. Regulators. Compliance Staff. Accountants and Consultants. Graduate and Management Trainees.
Day 1 Today’s Middle Office The Middle Office and Dealer Support Defining Roles & Responsibilities Middle Office Establishment Functional Analysis How to Get Things Started The Role of the Middle Office in Controlling and Mitigating Risk Middle office Functionality Explained The middle office as the catalyst for control Front Office Support The Training & Development Role The Co-ordinator How to Structure Effective Middle Office Operations Current Examples Organisation and Reporting Lines Establish best practice reporting structure which includes: The Board CEO COO CRO Workshop and practical discussion on how to make a middle office work effectively in your institution. Case Study Video: Real Life Documentary of a Banking Collapse. Group discussion concentrating on internal and external failures and its relevance to today’s highly complex and changing environment. Day 2 Introduction to Derivatives Definition The development of the swaps market The swaps market and its players Plain Vanilla Matched interest rate swap Basis swap examples Forward swaps Currency interest rate swap Options Caps Floors Collars Swaptions Exchange Traded Versus OTC Products Hedging using Futures Practical Trading Examples Hedging to Reduce Risk Hedge Products The Process of Hedging Case Study: How to hedge using Derivative Products. Establishing Limit Controls How Guidance Limits vs. Mandatory Limits are used to Control Risk Credit Stop Loss Sensitivity Stress Testing Equity Market Trading Exercise: Limit Setting and the Use of a Stop Loss. Case Study – Allied Irish Bank (ALLFIRST) This case study will clearly highlight how a lack of proper controls, knowledge and infrastructure can have such devastating consequences. It will also show how this could have been identified and easily prevented by a properly structured middle office. Day 3 The BIS/BASEL Accord as it relates to Operational Risk and the Role Of Middle Office. Key points in new Basel Capital Accord Discussion on the implications for Middle Office and Risk Managers Main objectives and implementation plan. Identification and Prioritisation of key risk factors Establishing a risk hierarchy Group discussion on the benefits / pit falls of risk models and measurement systems. Controlling The Processing Flow. Where are the Key Risks and Crucial Control Points Pre-Dealing Checks & Deal Slip Controls Middle office Function Back Office Processing Payment & Reconciliation Accounting & Documentation Effective Management Information Systems. The Design of Management Information Systems Practical Points & Real life Examples Visual Reporting & Control Mechanisms Sensitivity Gap Controls Volatilities Stress Testing New Product Steering Committee Case Study: New Product Steering Committee. Procedures The Value of Effective Procedures Production Use Maintenance Day 4 Case Study: Group discussion: “The Biggest Fraud Case in Banking History” Societe Generale Paris. Despite Millions of US$ spent on highly developed IT and Risk management systems, one person was allowed to go undetected for years building up positions of $50 billion and fantastic losses of some US$7 BILLION! Societe Generale is just another failure in a very long line of banking failures/crisis in which the only real difference is the size of the actual loss. This session will clearly demonstrate how the Middle office/ and other departments with responsibilities for risk could have easily prevented this fraud. Portfolio Controls How to establish proper controls over the following portfolios Trading Investment Hedge Arbitrage Managed Asset Portfolios Tools for controlling Portfolio Exposure Yield Risk / Return Funding Costs Margin Internal Deals Case Study/Group discussion: The US$2Billion loss at UBS London. Course summary and close.