PTMBA2027 Risk Management

Participation Prerequisites

none

Course Content

ABOUT THIS CLASS

In times of global challenges, systemic risks, and recurring crises, effective leadership requires strong competencies in risk management and crisis preparedness.
This course introduces key concepts and techniques of (financial) risk management for corporations and financial institutions. Students will explore the foundations of probability distributions, risk concepts, scenario thinking, simulation methods, and the psychology of risk perception and loss aversion.

The course highlights the strategic relevance of risk management within organizations, with a special emphasis on climate change risk management. Through class discussions, case studies, and guest lectures, participants will gain both theoretical understanding and practical insights into how risk management supports strategic decision-making and resilience.

 OBJECTIVES OF THE CLASS

• Understand the global dimensions of risks and crises.
• Identify and define probability distributions and key risk concepts.
• Analyze the psychology of risk perception and loss aversion, and understand what leaders need to know about risk dynamics and herding.
• Apply scenario thinking and simulation techniques to decision-making under uncertainty.
• Integrate strategic and operational risk management into corporate leadership.
• Address climate change risks as a central element of business strategy.
• Understand the function and use of derivatives such as options, futures, and swaps.
• Gain insight into financial and commodity market dynamics.
• Apply risk management frameworks in corporate and banking contexts.
• Develop resolution plans to enhance crisis preparedness and response.

Session Information

Lessons Pack: The required course packet contains the material for the class (no pre-reading required).

Cases: Students have to work on different cases during the course. Cases will be handed-out in-class.

CLASS ETIQUETTE

• Reliability – Engagement, presence and timeliness are key pre-requisites
• Diversity – Take the opportunity to learn from each other
• Respect – for your colleagues and lecturers
• Trust – Confidentiality
• Enthusiasm – Enjoy the course, take part, try new ideas
• Professionalism – Behavior on highest standards
• Disturbances – Cell phone, BlackBerry, eBay only in the breaks; and no laptops during the guest session!
  

SESSIONS AND REFERENCES

Session I

• Introduction and Value Added of Risk Management
• Corporate Risk Management
• Management of Climate Change Risk
• Case Risk and Strategic Management and Climate Change Risk
• Psychology of Risk Perception, Risk/Loss Aversion, and Herding

Session II

• Hedging with Futures/Forwards, Options, and Swaps
• Futures and Forwards on Financial Assets and Commodities
• Case CO2-Hedging and scenario analysis
• Swaps and Interest Rate Hedging
• Case Simulation of DAX Investments with Futures and Options

Session III

• Risk Management in Financial Institutions
• Case Resolution Plans for Preparing a Financial Crisis
• Principles of Banking Regulation
• The Role of the Financial Industry in Managing Climate Change Risk 
• Exam Preparation

Guest Lectures

• Drebes, adidas AG, Corporate Risk Management
• Gerold Grasshoff, BCG, Risk Management in Banking

Intended Learning Outcomes and Competencies

• Adequate use and judgement of basic corporate and financial risk management and measurement methods
• Understanding and applying futures, options and swaps for risk management
• Linking Risk to Strategic Management 
• Understanding Climate Change Risk Management
• Understanding the Psychology of Risk

Form of Examination

Class participation (20%)

Cases (30%)

Final Examination (50%)

The teaching style will be a combination of classical classroom teaching, group work on in-class cases, presentation, and discussion.

Literature

Chapter 1:

·       Hull, J. (2015): Risk Management and Financial Institutions, chapter 1**

·       Additional: Culp, C. (2001): The Risk Management Process, Wiley, chapter 4

·       David Tuckett: Minding the Markets: An Emotional Finance View of Financial Instability

·       Robert Shiller (2009): Irrational Exuberance, Princeton University Press, 2nd Edition, chapter 9.

 Chapter 2:

·       Konstantinides (1998): Clarity from competence, Risk 1998**

·       Culp, C. (2002): The Art of Risk Management, Wiley, chapter 9**, 10**

·       Additional: Hull, J. (2015): Risk Management and Financial Institutions, chapter 27

·       Shell Annual Report 2024**

·       RWE Annual Report 2024**

Chapter 3:

·       Hull, J. (2015): Risk Management and Financial Institutions, chapters 5**, 7, 8

·       Krapels, E. (2001): Re-examining the Metallgesellschaft affair and its implication for oil traders, in: Oil&Gas Journal**

·       Additional: Bodi, Z., Kane, A., Marcus A. (2008): Investments, McGraw Hill, chapter 21-23

Chapter 4:

·       Hull, J. (2015): Risk Management and Financial Institutions, chapters 6**, 15, 16, 18, 19, 26 and (for VaR and probability distributions) 10, 11, 12**

·       Additional: Jorion, P. (2007): Value at Risk – The new Benchmark for Managing Financial Risk, McGraw Hill, Chapter 3, 5

·       Deutsche Bank Annual Report 2024**

Note: starred (**) chapters are provided as scans. These are the most relevant readings for the course.