As a GRC / #ERM Professional one should always follow the golden rule, that is ->
"If it hurts, it works!"
If our actions and impressions are not keeping the front and back offices at the edge of their toes, then we aren't fulfilling our job description responsibilities.
You have to annoy people to get things done at Financial Businesses!
Cannot be too sweet all the time.
Risk Managers should adopt a more stern and stiff disposition.
Have an awfully cosy relationship with the traders and RMs might not be helpful.
If a treasury dealer or capital market trader is violating his stated desk exposure or any other risk limits aka haircuts, assigned to him by the Middle Office, the former should not be allowed to engage in financial activity any further.
Just unplug the PC/ Trading screen.
The Global Risk Community and the institutions which hire Risk Experts are equally complacent.
Rogue traders and bankers have damaged financial systems all over the world, from the infamous banking failures of 1974 back in the City, extending up to #Baring and SOCGEN, and beyond!
Nic Nielson at the Baring Bank? Remember?
He was doing both front and back-office transactions together.
Nobody caught him because there was no Middle Office to validate, cross-check and revalue his Transactional P&L a/c
Hence, he used a string of derivatives to hide the risks.
Actually, regrettably, most of the risk managers and financial engineers come from highly numerate backgrounds, which do not teach criminology, sociology of crime, or forensic investigation methods.
Hence, RMs fail to detect rogue trading using standard risk assessment tools
Check the blotter!
All the traces of the crime are in the blotter or the deal sheet which a front office trader/ dealer or fund manager uses adjacent to the trading screen.
If you find that transactions are erratically cancelled, overwritten or rewritten, that is a crime scene!
Most of the dealer/ traders still use paper, pencil and eraser, to record transaction deals at bid/offers rates
The recap sheet position is handed over to the back office, for reconciliation with the MIS
Middle Office must check, validate, revalue, & if need be stop transactions
Front Office transactions should never hit the P&L Account directly.
They should follow the full audit trail and must go through the back office and middle office simultaneously, to prevent both fraud and predicate financial crimes unleashed by the potential rogue traders!
However, things have become more complicated with the treasury department at most banks placed under the Head of Transactions Banking.
That makes treasury specific risk oversight more tenacious.
Not in favour of that.
Treasury and ALM are highly specialized activities
In short financial institutions should include predicate financial crimes compliance, AML/KYC, sanctions check listing, CFT controls, FINTECH drove ML/DSS Algo Risks, white collar fraud assessment and the most opaque of all risks, which happens to be Cyber Crime, more seriously!

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More from @SAH16928046

3 Jun
Is it permissible to take a conventional style loan to finance/fund a #Shariah Compliant Commercial Project?
A loan is not permissible in the traditional banking operational jargon or sense!
The Credit application should have an underlying asset trade funding request inbuilt and/or an explicit tangible commercial intent stating the same, embedded in the actual financing/investment contract.
Any transaction which provides money without a trading justification will not work.
In Islamic Finance, debt-refinancing and NPA - Non-performing Asset rollovers are not allowed.
Read 18 tweets
3 Jun
How good is the #Oxford Masters (MSc.) in Law and Finance program?
Pairing Finance with the law or Legal studies is not a bad combination.
But, you need to develop a road map for your career.
Whether you would like to start off as a #paralegal or as a financial / management accounting or a compliance analyst in the financial services sector of the economy in the long run?!
Because such degrees make you neither fish nor foul.
This is strictly my opinion and you may disagree.
Oxford Universities Degree/s, are second to none.
Read 17 tweets
30 May
The failure of Risk Management is manifold.
Only a day earlier I was in conversation with a treasury market dealer, who runs a fixed income, bond derivatives and call /clean rates desk at a leading global bank.
I was surprised to note that he didn't factor risk into decisions!
Upon my inquiring, he told me that he made placements, without actually computing Risk Adj. Return for any of the fixed-rate drove asset classes or potential exposures.
His targeted profitability metric is the market yield aka IRR for bonds and bullet rates for MM Placements.
So, I insisted on asking further, as to what role was the risk department playing at the bank, and why nobody taught him how to compute and understand RAROC family?
Why treasury front office didn't comply with the risk budgets, etc?
Read 10 tweets
30 May
What is the role of treasury management in the banking sector?
Note: (this thread only includes discussion on investment in T-Bills and other Long - term Fixed Income securities such as the Government Securities and other Bonds; additionally, the squaring of all book positions, in regard to Money Market and FX Asset class/es) & AL- Gap Mgmt
I have excluded investments in hybrids, convertibles, capital market products, share underwriting, and derivatives hedging /trading and the other complimentary Investment Banking Activities, which might also be included in the treasury job description at some retail banks
Read 17 tweets
25 May
Which is the best choice, to do an MSC in professional accountancy or an MBA after an ACCA completion?
Tough question.
If you can do your ACCA(plus your Oxford Brookes BSc Hons Accounting degree) and later clear the ICA UK (of Wales and England) Exams, nothing like it! later pass all the professional body requirements(CIPD) and turn into a full FCA Member?
Sign off accounts and financial statements as the CFO or get yourself the job of an Audit Head.
Read 10 tweets
20 May
Which are some stylized failures of Risk Management?
It is the only subject when turned into a profession, which fails to deliver in SVA terms in most of the cases, as witnessed now outside the Insurance Sector
Insurance is a different game because the profession is led by well-trained quantitative professionals such as Actuaries
Why it has not worked well outside the Insurance Sector/s?
The multiple reasons for the failure of Risk Management and Auditing Departments at firms could be the following =>
Read 20 tweets

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