CPA Australia Financial Risk Management study plan

Map the risk governance architecture: board risk appetite statement, three lines of defence, CRO reporting lines and board risk committee charter, and explain in writing how each layer constrains risk-taking

Define each major risk taxonomy (market, credit, liquidity, operational, model, enterprise) and classify ten real or constructed loss events into the correct category with justification

Distinguish risk appetite, risk tolerance, risk capacity and risk limit, and draft a one-page cascade showing how a board appetite statement translates into desk-level limits

Explain the Basel framework's three pillars and where each pillar touches governance, measurement and disclosure obligations for an authorised deposit-taking institution

Calculate and interpret the main market risk measures: volatility, variance-covariance VaR, historical simulation VaR and Monte Carlo VaR, on the same small portfolio so the differences in assumptions are visible

Compute parametric and full-revaluation delta-gamma VaR for an option position and explain why linear approximation understates risk for convex payoffs

Evaluate VaR's limitations (tail blindness, subadditivity failures, procyclicality) and contrast it with expected shortfall and stressed VaR

Perform and interpret backtesting: count exceptions against a 99% one-day VaR over 250 days, apply the Basel traffic-light zones and state the capital consequence

Decompose fixed income risk into duration, modified duration, convexity and key-rate exposures, and quantify the P&L effect of a 50 basis point parallel and steepening shift

Explain the mechanics of interest rate parity, purchasing power parity and the carry trade, and identify which exposures a corporate treasurer should hedge versus leave open

Distinguish translation, transaction and economic FX exposure and select an appropriate hedge ratio and instrument for each

Interpret Greeks (delta, gamma, vega, theta, rho) and describe how a delta-hedged book can still carry large gamma and vega risk

Apply the Basel market risk approaches at a conceptual level: standardised approach versus internal models approach, and the FRTB shift from VaR to expected shortfall with liquidity horizons

Build a counterparty credit risk profile: compute exposure at default, probability of default and loss given default, then derive expected loss and explain unexpected loss and economic capital

Distinguish current exposure, potential future exposure and peak exposure for a derivative counterparty, and explain the role of netting, collateral and margin in reducing credit exposure

Compute credit metrics for a single obligor and a two-obligor portfolio, showing how correlation changes portfolio unexpected loss

Compare credit scoring, ratings migration, structural (Merton) and reduced-form default models, stating the key assumption each makes

Explain credit risk mitigation techniques and their legal and operational conditions for capital recognition, including guarantees, credit derivatives and collateral haircuts

Apply the Basel credit risk approaches: standardised, foundation IRB and advanced IRB, and identify which parameters the bank estimates under each

Analyse securitisation and concentration risk, explaining how tranching redistributes loss and why correlation assumptions are the critical model input

Construct a simple cash-flow maturity ladder and compute the liquidity coverage ratio and net stable funding ratio from a given balance sheet, identifying the shortfall

Distinguish funding liquidity from market liquidity, and explain how a funding shock becomes a solvency event through fire sales and margin calls

Evaluate a contingency funding plan: early warning indicators, trigger levels, funding diversification and the role of central bank facilities

Explain intraday liquidity risk and the role of payment and settlement systems (RTGS, CLS) in transmitting liquidity shocks between institutions

Build a risk and control self-assessment for one process, identifying inherent risk, control effectiveness, residual risk and a remediation action with an owner and date

Analyse an operational loss event end to end: root cause, control failure, Basel event-type classification, and the capital and reputational consequences

Describe model risk management: inventory, tiering, independent validation, ongoing monitoring, and the controls that prevent a model being used outside its validated scope

Explain how enterprise risk management aggregates risk types, sets risk appetite limits and reports through a risk dashboard to the board

Map operational risk capital approaches (basic indicator, standardised, advanced measurement) and explain the loss-distribution approach and its data challenges

Distinguish forwards, futures, swaps and options, and match each to a specific hedging need with a rationale for instrument choice

Evaluate hedge accounting and economic hedging: basis risk, hedge effectiveness testing, over-hedging and the accounting volatility that arises when hedges do not qualify

Construct a worked hedge for a specified exposure using a forward or swap, quantify the hedge outcome under two price scenarios, and show the residual basis risk

Identify the risks that hedging cannot transfer, including counterparty credit risk on the hedge itself and liquidity risk from margin calls on cleared derivatives

Consolidate all domains into a one-page integrated risk framework showing how market, credit, liquidity, operational and model risk interact and where they are governed

Diagnose weak areas using timed practice under exam conditions, and re-teach the three weakest topics from first principles

Rehearse written responses that require judgement (limit breaches, model failures, liquidity crises) using a structured answer format of issue, analysis, recommendation

Verify recall of key formulas, ratios and regulatory thresholds without notes, and close any remaining gaps