Risk Management

Module Title	Risk Management
Module Code	25-6052-00L
Semester of Delivery	See Module Information Table
Mandatory/Elective/Option	See Module Information Table
Level	6
Credit Points	20
Assessment Mode Weighting	CWEX100
Pre-requisites	Financial Institutions and Markets (Level five)
Co-requisites	None
Class Contact Hours
Average Weekly	1.5
Directed Learning
Average Weekly	5
Module Leader	Mark Billings
	Sheffield Business School
Module Banding	A
Approval Status	Validated

Rationale

Risk management is more important than ever before to all organisations. According to "The Treasurer" (September 1995): "Relatively few organisations have developed comprehensive risk management structures which protect them from material capital loss." In September 1998 the same publication commented "It is very difficult to avoid taking risks altogether, unless we have an integrated approach which takes risk into account."

Three main factors are driving this shift in attitudes to risk management. Firstly, there is pressure on companies from various sources (Cadbury, Hampel, Turnbull, the Accounting Standards Board, amongst others) for more transparent reporting of risk to lift standards of corporate governance. Thus companies are under increasing pressure to justify underlying business decisions and to disclose risk management policies (subject to the need for confidentiality of commercially sensitive information).

Secondly, as the pace of change accelerates the environment for major organisations becomes ever more risky. Now more than ever before, it is necessary for organisations to recognise the importance of adopting a portfolio management approach so that the returns on various activities are measured in relation to the risks of those activities.

Finally, society is less tolerant of failures resulting from poor risk management. This is evidenced, for example, by public responses to disasters and the higher expectations of consumers of goods and private and public services.

This module seeks to provide a coherent conceptual framework for the identification, analysis and management of risk within the context of the modern business environment. The module also intends to provide insight into recent trends in corporate risk management such as the move away from using insurance as the primary means of limiting risk. This shift towards the use of a wider range of risk management techniques has implications for the insurance market and the operations of the insurance companies in particular, but also for the financial sector in general.

Risk and risk management will have featured at various points in students' previous studies. The increased emphasis placed on risk management by professional bodies, regulators and other stakeholders makes this an area students are increasingly more likely to encounter in their working lives. This module attempts to bring together theoretical views and practical approaches in a way in which will assist students in dealing with risk-related issues in their future careers.

Summary of Aims

1. To provide an introduction to the developing field of risk management
2. To give a critical understanding of a number of theoretical approaches to risk management which currently exist
3. To provide an appreciation of the advantages associated with adopting an enterprise wide approach to risk management
4. To develop an awareness of and the ability to analyse the factors which influence the corporate demand for insurance and other risk management techniques
5. To develop students' ability to identify and measure the risks inherent in major organisations and critically evaluate the practice of cost-effective risk management within organisations.

Anticipated Learning Outcomes

On completion of the module, the student should be able to:

1. Explain the role and scope of risk management in organisations and justify the need for a holistic approach to risk management
2. Recognise and apply the principles which underpin the identification, measurement and management of risk in large organisations
3. Undertake a critical analysis of risk from the viewpoint of the individual transaction, the business module and the organisation,
4. Describe and evaluate the effectiveness of a variety of approaches to risk financing, risk transfer and risk control, and the factors riving the corporate demand for such approaches
5. Identify and discuss the nature of various financial risks - market risk, portfolio risk, credit risk, etc. and analyse these and other relevant risks (e.g. operational) and suggest risk management solutions in the context of financial institutions
6. Identify, research and make appropriate use of source material relevant to organisational risk management, and use appropriate references to, and compile a suitable bibliography of, such material.

Assessment and Feedback Strategy

Formative assessment will take place in seminars through group discussion and group presentations. Feedback will be given directly in these sessions.

Summative assessment will have two components. A time-constrained examination will contribute 60% to the final grade. An individual assignment in the form of a substantial written report with a word limit of 3,000 words will contribute 40% to the final grade. It is anticipated that submission of the assignment will be required 2-4 weeks before the end of teaching and that written feedback will be provided in the final week of teaching so that students are able to reflect on the outcome before the examination.

General feedback may also be given, where appropriate, in class discussion and by posting to the relevant conference site. In addition, to these methods, feedback may be given in discussion with individual students.

The nature of the individual assignment will vary from year to year and will typically not assess all learning outcomes. The examination and the individual assignment will be designed together to ensure that all learning outcomes are assessed.

The assessment strategy will focus on the student's understanding of the theoretical concepts and techniques of risk management, and the student's ability: to apply these to risk management problems faced by organisations; and to evaluate the effectiveness of corporate risk management strategies.

Module Assessment Criteria

Learning Outcome	Assessment Criterion	Level descriptors
		fail	PASS	2.2	2.1	First
Outcome 1	Examination and individual assignment	Weak explanation and poor justification of these aspects of risk management (RM)	Some explanation and justification of these aspects of RM	Clear explanation and sound justification of these aspects of RM	Rigorous explanation and careful justification of these aspects of RM	Perceptive explanation and comprehensive justification of these aspects of RM
Outcome 2	Examination and individual assignment	Weak and/or inappropriate recognition and application of these principles	Some recognition and application of these principles	Sound recognition and application of these principles	Thorough recognition and rigorous application of these principles	Thorough recognition and rigorous and original application of these principles
Outcome 3	Examination and individual assignment	Inaccurate and incomplete analysis of risk	Some appropriate, but incomplete, analysis of risk	Clear but partial analysis of risk	Clear and full analysis of risk	Comprehensive and perceptive analysis of risk
Outcome 4	Examination and individual assignment	Weak, inaccurate, incomplete description and evaluation of these aspects of RM	Some description and evaluation of these aspects of RM	Detailed description and evaluation of these aspects of RM	Detailed and thorough description and evaluation of these aspects of RM	Comprehensive and perceptive description and evaluation of these aspects of RM
Outcome 5	Examination and individual assignment	Weak and inaccurate description and discussion of relevant risks and inappropriate suggested solutions	Some description and discussion of relevant risks and suggested solutions	Sound description and discussion of relevant risks and appropriate suggested solutions	Accurate and thorough description, and well-reasoned discussion of, relevant risks and highly appropriate suggested solutions	Comprehensive and insightful description and discussion of relevant risks and imaginative suggested solutions
Outcome 6	Individual assignment	Little or no use of relevant background materials, no referencing or bibliography	Some use of relevant background materials, partial referencing and bibliography	Some use of a range of relevant background materials, full referencing and bibliography	Full use of a range of relevant background materials, full referencing and bibliography	Full and imaginative use of relevant background materials, full referencing and bibliography
Not included in outcomes but desirable: Written communication	Examination and individual assignment	Poorly written, hard to follow, spelling and grammatical errors.	Able to follow points made, some spelling and grammatical errors.	Reader- friendly and few spelling and grammatical errors.	Very reader-friendly, few or no spelling and grammatical errors.	Very reader-friendly, few or no spelling and grammatical errors, imaginative/ innovative approach to communication.

Teaching and Learning Strategy and Methods

This module involves the student acquiring knowledge and theoretical understanding of the general principles of risk management and being able to apply these to individual risks, organisations in general and financial institutions in particular. This will be achieved through the provision of a detailed course booklet and plan of work setting out an extensive programme of directed personal study, including general background literature, specialist theoretical texts, professional literature and reports. Minimum reading requirements prior to contact sessions will be fully documented. Knowledge and understanding will be discussed and applied in seminars, which will test students' problem-solving and analytical skills through the use of group discussion and case study analysis. Group discussions will focus on questions and issues highlighted by the module leader for consideration by students within the context of their private study, and with questions and issues raised by students themselves. Case study analysis, integrating literature and practical application, will be led by students and related to papers prepared by students on defined case study areas.

The emphasis of the teaching and learning strategy is based upon a wide range of directed learning, with particular weight being placed upon directed reading and the use of learning resources, including databases and internet sources. Students will be expected to devote at least as much time again to undertaking general background reading, self-directed research and problem investigation and personal reflection on the learning experience.

Indicative Content

• the nature of risk - different ways of defining and classifying risk
• the perception of risk
• the development of the role of risk management
• techniques used in identifying sources of risk
• the measurement of risk - different approaches such as sensitivity analysis, discounted cash flow analysis, and the ranking of risk
• risk and market value - the financial impact of risk - links to finance theory through issues such as optimal capital structure, the costs of financial distress, and Modern Portfolio Theory (MPT)
• risk and society - the human impact of risk, the stakeholder approach to risk management, risk and the environment, risk in the public sector
• conflicts of interest and contradictions in risk management (e.g. between finance and public relations)
• assessing the extent of risk in the business as a whole - the contribution of various business modules to the total risk
• controlling risk - the control of physical risks and the debate between the anticipationist and resilience views of risk control
• financing risk - the role of corporate insurance and factors influencing the demand for corporate insurance
• financing risk - alternatives to insurance - e.g. captive insurers, risk-sharing pools and other alternative risk transfer (ART) techniques
• risk management in financial institutions - operational risks and an introduction to Value at Risk (VaR)
• risk management in discrete projects e.g. the development of computer systems.

Indicative Reading List

There are few seminal works on risk management. Up-to-date texts will be identified and recommended. A text typical of the type which might be used as a main reference work is:

C.A.Williams, M.L.Smith and P.C. Young (1998), Risk Management and Insurance, eighth edition, McGraw-Hill.

Academic journals such as The Geneva Papers on Risk and Insurance will provide a source of readings, as will publications of relevant professional bodies such as 'The Association of Corporate Treasurers and The Institute of Chartered Accountants in England and Wales' (CIMA).

There are also many websites providing information about risk management, although these change with considerable regularity and up-to-date sites will be included in the detailed scheme of work.