Risk Accounting and Risk Management for Accountants


  • Dimitris Chorafas, Independent Finance Consultant, France

Both Accountants and Auditors are confronted daily with challenges associated with the evaluation of credit risk, market risk, and other exposures. The book provides up-to-date information on the most significant developments in risk management policies and practices. Accountants whose work under International Financial Reporting Standards increasingly involves risk control in their job will find this book of practical value with the inclusion of material on "how to" successfully design, implementation and use risk control measures. Designed specifically for accountants the book starts with the fundamental factors underpinning risk: volatility and uncertainty, and then shows how and why accounting, auditing, and risk control correlate. The themes covered in the book include: credit risk, market risk, liquidity risk, investment risk, and event risk.
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Accountants whose work under International Financial Reporting Standards increasingly involves risk control; Managers and members of risk control operation departments.


Book information

  • Published: July 2007
  • ISBN: 978-0-7506-8422-4

Table of Contents

PART ONE: RISK AND THE ACCOUNTING PROFESSIONChapter 1RISK, VOLATILITY, AND UNCERTAINTY1. Risk Defined2. Kinds and Patterns of Risk3. The Role of Judgment and of Analytics4. The Science of Risk Management5. Exposure to Systemic Factors6. A Policy for Risk ProtectionChapter 2RISK MANAGEMENT AND THE ACCOUNTANT1. Beyond Classical Accounting2. Thinking Out of the Box3. Newton4S pRINCIPLES4. Pareto’s Law5. Using Cash Account for Risk Management6. Tracking Creature Accounting PracticesChapter 3DUTIES AND RESPONSIBILITIES WITH RISK MANAGEMENT1. The Accountant’s Mission in Risk Control2. Quality of Assets and Quality of Management3. Monitoring Assets and Liabilities4. Observing Accounting Standards5. Establishing a Code of Conduct6. Personal AccountabilityChapter 4ACCOUNTING FOR TOTAL EXPOSURE. A CASE STUDY1. Total Exposure Defined2. Staal Bankiers. Case Study on Total Exposure3. The Need for Understanding Where the Risks Are 4. Dynamic Financial Analysis5. Organization for Risk Management6. The Management of ChangePART TWO: RISKS TO BE KEPT UNDER CLOSE WATCHChapter 5CREDIT RISK 1. Credit Risk Defined2. Counterparty Risk3. Credit Policy4. Credit Limits5. Credit Risk Management 6. Credit Risk MitigationChapter 6 CASE STUDIES ON LOANS THAT CANNOT BE REPAID1. Exposure Due to Sovereign Debt2. Sovereign Loans that Go Bust3. Risky Investments in Russian Bonds. A Case Study4. Credit Risk in the Corporate Sector5. Credit Risk with Hedge Funds6. Credit Default and Recovery Swaps Chapter 7MARKET RISK1. Market Risk Defined2. Trading Risk3. Equity Price Risk4. Interest Rate Risk5. Foreign Exchange Risk6. Value at Risk7. Beyond Value at RiskChapter 8INVESTMENT RISK1. Position Risk2. Risk Tolerance with Investments3. One-Sided Securities Analysis4. Case Study with Alstom5. Case Study with Asia Pulp & Paper6. Insurance Risk. Case Study with Longevity RiskChapter 9RISK, REWARD, AND RUIN1. Risk Appetite2. Liquidity rISK3. Event Risk4. Legal Risk 5. Payments Risk6. Real-time Risk ReportingPART THREE: RISK, REGULATION AND MANAGEMENT CONTROLChapter 10BASEL II AND RISK MANAGEMENT1. Base II and the Accountant 2. Competitive Impact of Basel II3. Credit Risk Metrics: PD, LGD, EAD4. Regulatory Capital and Hybrid Capital5. Open Issues with Basel II6. Implementation Plan and Simulation StudiesChapter 11RISK-BASED PRICING 1. Why Risk-Based Pricing?2. Risk Drivers3. Risk Factors4. Earnings at Risk5. Marking to Market6. Shortcomings of Valuation ModelsChapter 12 A DEVIL’S ADVOCATE IN RISK MANAGEMENT1. Role of the Devil’s Advocate2. The Mission of Management3. Policies for Control of Exposure4. Failures in Control of Risk5. Learning from the Engineering Sciences6. The Importance of Confidence IntervalsChapter 13 BOARD OF DIRECTORS AND THE RISK MANAGER1. Risk Control Responsibilities of the Board2. Why Board Members Must Understand Risk and Return3. Risk Management Is Like Pretrial Preparation4. The Monetization of Risk5. Client-Oriented Decisions on Exposure6. Profile of a Chief Risk Officer