Financial Risk Management

Study guide: fourth edition

The global business environment is ever changing, and as a result, organisations are exposed and vulnerable to an increasing array of financial risks. These include financial risk, such as funding and liquidity risk, market risk from changes in interest rates, exchange rate or commodity price movements, credit risk and operational risk, and increasingly to the financial impacts of climate risk. The purpose of this subject is to equip candidates with the necessary skills to assess these financial risks and manage them strategically with the use of financial instruments.

Financial Risk Management is an elective subject offered in the CPA Program and is related to content in several of the compulsory subjects, including Ethics and Governance, Financial Reporting and Strategic Management Accounting.

Exam structure

The Financial Risk Management exam is comprised of multiple-choice questions.

General objectives

On completion of this subject, you should be able to:

• understand risk and a risk management framework
• identify the types of financial risk faced by an organisation
• apply a practical approach to assessing, monitoring and managing an organisation's financial risk
• understand the funding, liquidity, interest rate, foreign exchange, commodity price, credit and operational risk that organisations face
• advise an organisation on the procurement and management of funding and the allocation to competing long-term investments
• advise an organisation on the types of financial instruments that could be used to best manage an organisation's financial risk
• demonstrate the practical elements of accounting for derivatives, covering both embedded derivatives and derivatives used for hedging purposes
• explain responsibilities for financial risk and regulatory requirements, and the control framework to manage both financial and operational risks.

Subject content

The subject is divided into eight modules.

The weighting column in the following table provides an indication of the emphasis placed on each module in the exam. The proportion of study time is a guide for you to allocate your study time for each module.