Certificate In Back And Middle Office Management

Certificate In Back And Middle Office Management A modern perspective with a focus towards operations and operational risk management and control 16 – 19 March 2014 • Jumeirah Emirates Towers Hotel, Dubai, UAE

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Successfully understand the back and middle office operations and management functions from the perspective of operations and operational risk management 5 Key Business Benefits 1. Explore best practice and current approaches in the fast moving areas of operational and operations risk management and control 2. Obtain an overview of the issues and effective solutions in managing back and middle office staff, processing transactions, transaction volumes, new products and third party suppliers 3. Discover effective and efficient ways of how back and middle office operations can improve the performance of the treasury systems, cash and securities management, and internal funds transfer pricing systems used in the asset/liability management function 4. Learn about the role of the back and middle office functions in the trading, custody, clearing and settlement processes and how improvements in these functions increase the effectiveness and profitability of the trading group 5. Distinguish, construct and maintain effective and efficient relationships of the back office with the front and middle offices, with a focus on the associated control, monitoring, compliance and risk management policies

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Meet Your Expert Course Director

The George Washington University School of Business, IIR Middle East’s Academic Partner, is dedicated to excellence: in its teaching and research about management, in the public and private sectors, within the United States and internationally.

The school has a 75 year history of preparing men and women for leadership in both the public and private sectors. Known internationally for its dedication to academic excellence, the school draws students from all parts of the United States and around the world.

Beyond first class teaching and scholarship, the school’s faculty offers practical experience in the issues and challenges confronting business and government. Its research centres link faculty and students with US and international business and government organisations. Recent distance learning initiatives have expanded the school’s global reach.

Course Requirements And Certificates Delegates must meet two criteria to be eligible for an IIRME/GW University Certificate of Completion for a course: 1) Satisfactory attendance – delegates must attend all sessions of the course. Delegates who miss more than two hours of the course sessions will be ineligible to sit the course assessment 2) Successful completion of the course assessment.

The course assessment will consist of an examination with true-orfalse and multiple-choice questions and satisfactory participation in the group exercises. The examination will occur near the end of the fourth day of the program. * Delegates who do not meet these criteria will receive an IIRME Certificate of Attendance. If delegates have not attended all sessions, the Certificate will clearly state the number of hours attended.

Training Aids Lectures will be complemented with Excel-based operational risk models. Numerous case studies/exhibits will be discussed based on real market operations and operational events, failures and issues that directly relate to programme material. This will help the delegates gain a more thorough understanding of current operations and operational risk best practice. Basic knowledge of statistics and probability will be useful in understanding the applicability of the Excel-based operational risk model

Dr. John W. Dalle Molle is an independent financial market consultant specialising in quantitative credit, energy, market and operational risk management, analytics and modelling. Recently, he has been involved in model validation consulting projects with major Singaporean and Malaysian banks.

He has presented executive educational and professional training programmes in Africa, the Americas, Asia-Pacific Region, South Asia, the Middle East, and various European countries. His clients include several large financial institutions and central banks. In the past, he has also taught at a number of renowned universities in Asia, Europe, and the Americas. Dr. Dalle Molle has also made several professional presentations around the world in conferences and exhibitions.

Course Description The course offers a modern approach to defining structural units of a financial organisation that mainly segregates into back, middle and front office functions. The course presents best practice for managing the back and middle office operations and their relationships with the front office and other operations units, such as IT department or internal audit. It will also cover operational risk and operations management procedures from the perspectives of the trading, clearing, settlement, custodial, asset serving, treasury, funds transfer, risk management and control functions. The major services provided by the back and middle offices, in addition to the front office are detailed; problematic areas are highlighted and procedures outlined.

Additionally following operational risks and operations management areas are examined: •

Operational events, key risk factors, indicators, drivers and escalation triggers

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Comparison of the back, middle and front office operations

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Operational risk assessment, identification and measurement strategies

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Fraud and Anti-Money Laundering (AML) detection and prevention initiatives

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Financial services and operations Business Process Outsourcing (BPO) risks

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Comparisons between credit, market and operational risks

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Operational risk from an Enterprise Risk Management (ERM) perspective

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Best practice for quality management, quality control, change management and process reengineering for back office operations and financial services

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Crisis management, business continuity management and contingency planning

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Operational regulatory risk measurement for Basel II and beyond

Who Should Attend?

Delegates attending this course should have a basic understanding of back office management and operations. This course is for Back Office and Operations Managers to Middle Office Managers and Treasury Managers who want to learn best practice in operational risk management and control, with a special focus on back office management and operations.

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/backoffice

Certificate In Back And Middle Office Management 16 – 19 March 2014 • Jumeirah Emirates Towers Hotel, Dubai, UAE Course Timings Registration and refreshments will be at 07.30 on Day One. Each day will commence at 08.00 and conclude at 14.30. There will be breaks for refreshments at approximately 10:30 and 12:30. Lunch will be served at the end of each day’s session.

Course Outline Day One

Day Two

Operational Risk Categories, Factors, Issues And Sources • Operational risk spectrum – defining operational risks and exposures • Recent market developments leading to increased exposures in operational risk • Operational loss causes, factors, events, effects and consequences • Decomposing operational risk – expected, unexpected and extreme losses • Unexpected operational losses due to people, processes and systems risks

Managing The Trading Book • Anatomy of a trade – introduction to trade processing • Trade order room functions – trade execution, capture, reconciliation and recording • Basic order information, types and processing • Purchase and Sales (PandS) department – trade confirmation, recording and booking • Stock record accounting and cashiering – receiving, delivering and vaulting of securities • Margin accounts, margin account maintenance, margin calls and close outs • Collateral management, margining and the position risk reduction • Daily cash reports, dual-entry bookkeeping and profit and loss statements • Responsibilities of the securities and derivatives trading operations functions • Comparing over-the-counter and exchange-traded markets

Excel Exercise – Generating random occurring operational events Organisational Structures Of Financial Institutions – Defining The Back, Middle And Front Offices • Operations and operational risk policies and organisation • General structure of back, middle and front offices and other operations departments • Overview and comparison of the functions of the back, middle and front offices • Activities and information requirements of back, middle and front offices • Effects of the operations structure on operations and operational risks Operational Event And Loss Databases • Definitions and information sources for operational events, losses and indicators • Elements and benefits to an operational event collection policy • Managing, controlling and monitoring operational event databases – roles and responsibilities • Setting capture thresholds for operational loss event collection Exhibit – Big Data - What is it and how might it affect an organization?

Comparing Credit, Market And Operational Risks • Assessment and management differences for credit, market and operational risks • Loss distribution definitions and assumptions for market, credit and operational risks • Defining Value-at-Risk (VaR) forecast for market, credit and operational risks • Comparing data availability for credit, market and operational risk modelling Exhibit – Recent credit and market losses and associated operational failures Exhibit – Large losses attributed to rogue traders and the related control failures

Exhibit – Dark pools, high-frequency trading and the end of the retail trader Excel – Calculating margins using the SPAN margining systems Clearing, Settlement, Custodial And Asset Servicing Processes • Trade settlement process and electronic trading platforms • Factors affecting and functions of settlement systems – conventions and issues • Settlement processes and controls and the consequences of settlement failure • Trade clearing processes – services offered by some clearing organisations • Comparing clearing procedures for securities and derivatives • Sample checklist for clearing and settling OTC derivatives transactions • Custody, custodians, custodial services and corporate events - Categories and applications of corporate actions and asset servicing - Corporate event processes and processing corporate actions - Delegates involved in the processing and managing of corporate actions - Reconciliation and custodial reporting requirements Treasury And Cash Management Functions • Treasury risk spectrum and functions of the treasury unit • Payment systems and the treasury function • Cash management, cash aggregation, receipts and disbursements • Forecasting domestic and foreign cashflows and collection activities • Liquidity management – cash budgeting and liquidity management tools • Short-term cash management and managing cash shortfalls • Interest rate exposure management, asset-liability management and gap analysis • Credit risk management – counterparty credit quality assessment, credit risk mitigation and control and collateral, limit and netting arrangements

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/backoffice

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Foreign exchange settlement, internal cash management and currency netting - Foreign exchange management and translation, transaction, economic and operational exposures and risks Treasury risk management – best practice for the treasury group - Treasury risk measurement – sensitivity analysis, scenario analysis and stress testing - Treasury information technologies and systems Hedging using interest rate, currency and credit derivatives and structured products

Day Three Asset/Liability Management (ALM), Funds Transfer Pricing Systems And Economic Transfer Prices • Overview of the Asset/Liability Management (ALM) desk - Overview and components of ALM function - ALM interest rate risk measurement techniques • Funds Transfer Pricing (FTP) systems - Internal use of funds, funds transfer pricing systems and the cost of resources - Objectives and limitations of traditional funds transfer pricing • Guidelines for setting Economic Transfer Prices (ETPs) - Economic transfer pricing, arbitrage opportunities and the maturity spread - Pricing schemes and economic transfer prices for lending activities - Transfer prices and cost of funds for lending activities • Economic transfer prices, maturity spreads and yield curve changes • Matched funds transfer pricing and the allocation of capital Exhibit – Economic transfer prices and Funds Transfer Pricing (FTP) systems Best Practice For Fraud Detection, Identification And Prevention • Red flags fraud indicators: recognising fraud types, root causes and symptoms • Fraud triangle – motivation, opportunity and rationalisation and now extending to Fraud diamond – capacity • Best practice for fraud detection, prevention and management • Ethical issues and providing whistleblower mechanisms • Fraud monitoring and control – investigations versus audits Exhibit – Infamous criminal prosecutions of financial fraud - circa 1990s and forward Procedures For Detecting And Preventing Money Laundering • Three stages of money laundering – placement, layering and integration • Identifying suspicious transactions at financial institutions • Monitoring investments, lending activities and electronic funds transfer • Supervisory anti-money laundering initiatives: detection and prevention procedures • Money laundering incidents procedures and reporting Financial Services Business Process Outsourcing (BPO) • Outsourcing financial services operations – a summary perspective • Identifying, selecting and managing costs and opportunities of BPO • Key outsourcing risks from the financial services perspective • BPO risk control and mitigation strategies and regulatory developments • Managing BPO relationships – infrastructure considerations and continuing challenges Exhibit – Outsourcing data storage and software management to the cloud – costs, benefits and the risks

Day Four Operational Risk Assessment, Identification And Measurement • Operational risk assessment, identification and measurement – defining and identifying key risk factors, indicators, drivers and escalation triggers • Operational risk profiling and factor selection for operational risk identification • Qualitative operational assessment techniques including risk maps, risk scorecards, workflow charts and tracking charts • Measuring and modelling operational loss severities, event frequencies and event durations • Operational risk loss event classification – risk sources and related risk indicators Operational Value-at-Risk (OPVaR) Forecasting, Backtesting, Stress Testing And Scenario Analysis • Compound risk models for loss severities, loss frequencies and loss event durations • Correlation mappings between operations and operational risks • Defining a OPVaR forecast using a historical simulation VaR model • Stress testing and scenario analysis for forecasting operational risk measures • Backtesting of operational risk models Exhibit – OPVaR forecasting for various frequency and severity distributions Excel Example – OPVaR forecasting using historical simulation VaR and different categories of random occurring Monte Carlo loss events Excel Example – Implementing operational risk back tests Operations And Operational Risk Monitoring And Control Functions • Back and middle office monitoring, independent risk reporting and setting limits • Operational risk audits, reviews and risk event reports • Long and short-term approaches for controlling operations risk - Netting arrangements, novation and the reduction of operations risk - Confirmation matching and netting of transactions • Operations controls procedures and limit setting Miscellaneous Operations And Operational Risk Management Functions • Enterprise-wide risk management from an operations perspective - Benefits and limitations of enterprise-wide risk management - Comparing traditional and enterprise risk management functions - Implementing an enterprise-wide operational risk management policy • Crisis management, business continuity management and contingency planning • Workflow analysis and assessment of operations performance • Financial services quality control, change management and process reengineering - Total Quality Management (TQM) - International standards for quality management systems (ISO9001) - Using Six Sigma process control techniques Modelling Operational Regulatory Capital Charges Under Basel II And III • Regulatory capital, ICAAP and the Basel I and II accords – overview • Basel’s three complementary pillars of operational risk - Pillar 1 – minimum requirements for capital charges - Pillar 2 – supervisory review process - Pillar 3 – public disclosure requirements • Basel’s risk measurement and op-risk regulatory capital measurement approaches - Basic indicator approach - Standardised approach - Advanced Measurement Approaches (AMAs) • Basel III - December 2010 Initiative and amendments for reforming global regulations • Backtesting operational risk models from a regulatory perspective

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/backoffice

Short Cases/Exhibits Included In Lectures, Presentations And Discussions:

• HSBC customer fraud and financial services outsourcing centers during Early 2000s (outsourcing, operational, oversight and fraud risks)

* Note main operational-risk exposure(s) for each case is in parenthesis and is italicised:

• “Big Bang” deregulation of UK financial markets and London Stock Exchange (LSE) during 1986 (regulatory and operations risks)

Recently-Occurring Noteworthy Incidents • Recent money laundering cases of HSBC, Standard Chartered and Wells Fargo - Circa 2012 (Geopolitical, Criminal and Money Laundering Risks)

• Cancellation of the London Stock Exchange’s TARUS Trade Settlement System in 1993 (operations, reputational and project management risks) • Bernie Madoff ’s Ponzi scheme and operations control failures of the early 2000s (supervisory, oversight and securities fraud risks)

• Recent 2013 trading systems glitches, coding errors and fat fingered errors including NASDAQ, Knight Capital, Goldman Sachs and Everbright Securities (Trade input oversight, IT and trading systems and operations risks)

• MF Global’s October 2011 collapse, CEO Jon Corzine’s speculative Euro-sovereign debt positions and commingling client funds (supervisory, trading and funds commingling risks)

• Trading systems and IPO processing issues for Facebook and BATS IPOS during 2012 (systems and operations risks)

• Mizuho Securities, fat fingers, and erroneous trade specification input during December 2005 (trade input oversight and trading systems risks)

• Virtual electronic currencies including Bitcoin – Cybertheft, fraud, and money laundering issues Circa 2005 and forward (fraud, money laundering and systems security risks) • Various international banks and the LIBOR rate-fixing scandal of the 2000s (Fraud, operations and transparency risks) • Overseas tax havens, US Taxpayers and “Secret” unreported Swiss bank account Circa 2000s (Tax & Legal Risks) • Dark pools, High-frequency trading and the end of the retail trader (Circa 2010 and forward)

Renowned, Significant And Illustrative Cases • ABN-AMRO, wire transfers and money laundering in the 1990s (Money Laundering Risk) • Bankhaus ID Herstatt (Germany) Closing and cross-border settlement risks during June 1974 (supervisory, oversight and cross-border settlement risks) • Bank of Credit and Commerce International (BCCI), settlement failures, fraud, money laundering, covert activities and legal jurisdiction issues during July 1991 (fraud, money laundering, geopolitical, and legal jurisdiction risks) • Bank of New York (BoNY), settlement processing system malfunction during November 1985 (settlement systems failure risks)

• New York Stock Exchange (NYSE) paperwork crisis and Wednesday trading halts during mid-1960s (operations, trade processing, technical systems, and settlement risks) • NYSE flash crash of May 6, 2010, nearly 1,000 DJIA point drop, high frequency trading controversies, setting of circuit breakers and role of Waddell & Reed Mutual Fund (electronic trading, trade systems, oversight, and supervisory risks) • Showa Shell Sekiyu (Japan), US$1.540 billion in losses during the early 1990s from foreign exchange trading as the Japanese Affiliate of Shell conceals FOREX losses for years (operations, fraud, trader oversight and supervisory risks) • Sumitomo Corporation, Yasuo Hamanaka and 10 years of unauthorised copper trading during the late 1980s and into the mid-1990s (operations, fraud, trader oversight, and supervisory risks) • Taiwanese earthquake of December 2006, severed submerged communication cables and disrupted electronic communications networks (natural hazard, technical fault and systems failure risks) • Belgium-based Society for Worldwide Interbank Financial Telecommunications (S.W.I.F.T.), US and European restrictions and restricting access for Iranian financial institutions to global interbank transfer networks in early 2012 (trading processing, geopolitical and trade sanctions risks)

• Russian mney laundering scandal and the Bank of New York (BoNY) during the late 1990s (fraud, oversight and money laundering risks) • Barings Bank (UK) bankruptcy, Euros Receipts Cancellations, ECU Clearing system knock-on effects during February 1995 (clearing systems and legal risks) • Trade halts due to flooding of LaSalle Street, the Chicago Financial District and old underground Delivery tunnels containing fiber optic systems, during April 1992 (Physical Systems and Trading Systems Risks)

Would you like to run this course in-house?

• Daiwa Bank’s Toshihide Iguchi and 30,000 unauthorised treasury market trades (operations, fraud, trader oversight, and systems risks)

The in-house training division of IIR Middle East

• Severed submerged communication cables on the floor of the Mediterranean Sea near northern Egypt and global communications network disruptions during January 2008 (natural hazard, technical fault and systems failure risks)

Tel: +971 4 407 2624 • Email: CTS@iirme.com www.iirme.com/cts

T: +971 4 335 2437 F: +971 4 335 2438 E: register@iirme.com W: www.iirme.com/backoffice

Certificate In Back And Middle Office Management 16 – 19 March 2014 • Jumeirah Emirates Towers Hotel, Dubai, UAE FIVE WAYS TO REGISTER IIR Holdings Ltd. P.O Box 9428 Dubai, UAE

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Certificate In Back Office Management 16 – 19 March 2014*

Course Fee Before 29 December 2013

Course Fee Before 19 January 2014

Final Fee

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US$ 4,795

WEB BC5309

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Course fees include documentation, luncheon and refreshments. Delegates who attend all sessions and successfully complete the course assessment will receive an IIRME/GW Certificate of Completion. *Book and pay NOW and bring your colleague for FREE on this course.

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