Lea Zicchino

The world changed after the global financial crisis of 2007-2009. This was, at least in part, caused by poor risk management. The crisis was particularly severe on the financial sector: some banks went bankrupt, but the price of the crisis was paid by the population at large. Some lost their savings, some lost their jobs when the financial crisis became a recession. But losses of savings and bankruptcies are possible also outside a major financial crisis. In part, this is the result of the uncertainty that is innate into any investment or enterprise but another crucial determinant is simply poor risk management that instead, when properly conducted, can reduce losses. Risk management establishes standards for aggregating disparate information, gathering data, calculating risk measures, and creating reporting tools that help to monitor risks and implement the appropriate action to mitigate them.

This course aims at understanding the main sources of risk (market, credit, liquidity, operational) and the basic tools to measure them. The course will also provide an overview of the post-crisis developments in regulation to limit risks in the financial systems as well as the tools used by the supervisory authorities to assess the health of financial institutions, banks in particular.