Chapter 6: Introduction to Risk Management

In this section

• Definition and Scope of Risk Management
  Definition and Scope of Risk Management (CFA Level 1): Defining Risk, Scope of Risk Management, and Why Is Risk Management So Critical?. Key definitions, formulas, and exam tips.
• Risk Management Framework and Governance
  Risk Management Framework and Governance (CFA Level 1): Key Elements of a Risk Management Framework, Building an Effective RMF, and Establishing Governance and the Role of the Board. Key definitions, formulas, and exam tips.
• Risk Tolerance, Risk Budgeting, and Policy Integration
  Risk Tolerance, Risk Budgeting, and Policy Integration (CFA Level 1): Understanding Risk Tolerance, Risk Budgeting Basics, and Policy Integration. Key definitions, formulas, and exam tips.
• Financial and Non-Financial Sources of Risk
  Financial and Non-Financial Sources of Risk (CFA Level 1): Understanding Financial and Non-Financial Risks, Classification of Risk Sources, and Financial Risks. Key definitions, formulas, and exam tips.
• Measuring Risk (VaR, Stress Testing, Scenario Analysis)
  Measuring Risk (VaR, Stress Testing, Scenario Analysis) (CFA Level 1): Value at Risk: Key Concepts, Key Assumptions and Interpretations, and VaR Calculation Methods. Key definitions, formulas, and exam tips.
• Risk Modification: Mitigating Strategies and Tools
  Risk Modification: Mitigating Strategies and Tools (CFA Level 1): Risk Avoidance, Risk Reduction, and Diversification. Key definitions, formulas, and exam tips.
• Governance Structures and Board Oversight
  Governance Structures and Board Oversight (CFA Level 1): Board of Directors’ Fundamental Role, Specialized Committees, and Chief Risk Officer. Key definitions, formulas, and exam tips.
• Enterprise Risk Management Concepts
  Enterprise Risk Management Concepts (CFA Level 1): Holistic Risk Management: A Unified View, Why the Holistic Approach Matters, and Key Pillars of ERM. Key definitions, formulas, and exam tips.
• Data Quality and Model Risk
  Data Quality and Model Risk (CFA Level 1): Understanding Data Quality and Its Relevance, Sources of Data Quality Issues, and Automating Data Processes to Reduce Error. Key definitions, formulas, and exam tips.
• Operational Risk Metrics and Reporting
  Operational Risk Metrics and Reporting (CFA Level 1): Understanding the Importance of Operational Risk, Defining Key Components of Operational Risk, and Core Operational Risk Metrics. Key definitions, formulas, and exam tips.
• Aggregating Risks Across Business Segments
  Aggregating Risks Across Business Segments (CFA Level 1): Understanding the Importance of Risk Aggregation, Challenges in Aggregating Diverse Risks, and Correlation Analysis: When Risks Collide or Cancel. Key definitions, formulas, and exam tips.
• Reputational Risk and Communication Policies
  Reputational Risk and Communication Policies (CFA Level 1): Understanding the Nature of Reputational Risk, Key Drivers of Reputational Risk, and Consequences Beyond Direct Financial Loss. Key definitions, formulas, and exam tips.
• Cybersecurity Risk in Portfolio Management
  Cybersecurity Risk in Portfolio Management (CFA Level 1): Evolving Landscape of Cybersecurity Risk, Technology Integration and Emerging Threats, and Potential Impacts on Portfolio Management. Key definitions, formulas, and exam tips.
• Integrating Risk Management with Strategic Planning
  Integrating Risk Management with Strategic Planning (CFA Level 1): Why Integrate Risk Management and Strategic Planning, Core Concepts to Keep in Mind, and Linking Strategy and Risk: A Practical View. Key definitions, formulas, and exam tips.
• Regulatory Requirements for Risk Management
  Regulatory Requirements for Risk Management (CFA Level 1): Key Global Regulations, Local Regulatory Bodies and Their Guidelines, and Capital Adequacy, Liquidity Ratios, and Leverage Limits. Key definitions, formulas, and exam tips.
• Stress Testing in Extreme Market Conditions
  Stress Testing in Extreme Market Conditions (CFA Level 1): Defining Extreme Market Conditions, Purpose and Fundamentals of Stress Testing, and Designing Stress Tests for Extreme but Plausible Conditions. Key definitions, formulas, and exam tips.