COLLEGE OF BUSINESS
Curriculum Committee
September 27, 2011
Page 1 of 4
2011-12 #3
Department of Finance
New course: Page 61, 2011-12 Graduate Catalog
CIP: 52.08
674. FINANCIAL RISK MANAGEMENT I (3). This course provides an introduction to
financial risk management including an overview of the purpose and function of financial risk
management within varying financial contexts. Topics include the basic types of financial risk
management and an understanding of how financial risk management creates value. PRQ:
Consent of department. CRQ: FINA 575.
Rationale: Over the last several years we have witnessed seismic shifts in the finance industry. Years of ever
increasing asset prices and greater and greater risk-taking supported by the engineering of ever more complex
financial derivatives have given way to plunging asset values and unprecedented timidity and trepidation.
Thoughtful investors and decision makers have always been mindful of the need to assess and address the risks
associated with their actions and positions, but in the aftermath of the (continuing?) financial crisis, business
entities of all types are increasingly emphasizing and analyzing the financial risks to which they are exposed.
This course could provide additional training in risk management for those in the MBA program and potentially
other Master’s level programs.
Duplication Note: We have reviewed the graduate catalogs and have found two courses with similar wording to the
course we are proposing. PSPA 653, “Intermediate Public and Nonprofit Financial Management,” lists financial
risk management as a topic. We contacted Kurt Thurmaier, Director of the Division of Public Administration, via
email on 9/28/2011. He replied on 9/29/2011 indicating the Division of Public Administration saw no duplication
between PSPA 653 and the proposed FINA 674.
TECH 638, “Risk Management,” addresses risk management in an occupational safety context. We contacted Cliff
Mirman, Chair of the Department of Engineering Technology, via email on 9/28/2011. He replied on 10/6/2011
indicating the Department of Technology saw no duplication between TECH 638 and the proposed FINA 674.
New course: Page 61, 2011-12 Graduate Catalog
CIP: 52.08
688. FINANCIAL RISK MANAGEMENT II (3). This course provides an in-depth examination
of advanced financial risk management issues including operational risk, risk adjusted returns,
and the effects of banking and other financial regulation. PRQ: FINA 674 or consent of
department.
Rationale: While the proposed course “FINA 674: Financial Risk Management I” introduces the concept of the
financial risk manager and the manner in which financial risk management is a value-added activity, FINA 688
delves deeper into the subject, examining specific, advanced, financial risk management criteria, and regulations
related to risk management. This course could provide additional training in risk management for those in the MBA
program and potentially other Master’s level programs.
Duplication Note: We have reviewed the graduate catalogs and have found two courses with similar wording to the
course we are proposing. PSPA 653, “Intermediate Public and Nonprofit Financial Management,” lists financial
risk management as a topic. We contacted Kurt Thurmaier, Director of the Division of Public Administration, via
COLLEGE OF BUSINESS
Curriculum Committee
September 27, 2011
Page 2 of 4
2011-12 #3
email on 9/28/2011. He replied on 9/29/2011 indicating the Division of Public Administration saw no duplication
between PSPA 653 and the proposed FINA 674.
TECH 638, “Risk Management,” addresses risk management in an occupational safety context. We contacted Cliff
Mirman, Chair of the Department of Engineering Technology, via email on 9/28/2011. He replied on 10/6/2011
indicating the Department of Technology saw no duplication between TECH 638 and the proposed FINA 688.
Other catalog change: Page 60, 2011-12 Graduate Catalog
Department of Finance (FINA)
Chair: Marc W. Simpson
Graduate Faculty
↓
Master of Science in Financial Risk Management
The MS in financial risk management program provides advanced study to prepare students for
careers in risk management in banks, investment firms, and in corporate treasury departments.
The program is designed for full-time students. It focuses on the latest advances in hedging and
risk mitigation techniques incorporating the use of complex financial instruments, including
swaps, futures, forwards, and options.
Admission
In addition to the College of Business standards listed under “Graduate Study in Business,” an
applicant is required to have a baccalaureate degree from an accredited institution with at least 15
semester hours in finance or department approval.
Phase One
See Phase One Requirements listed under “Graduate Study in Business.”
AND
The Phase One foundation courses will be included in a student’s program of study unless she or
he has earned a C or better in corresponding undergraduate courses or a B or better in equivalent
graduate courses elsewhere, or has passed the first and only attempt of the Phase One exemption
examination.
In addition, those students who do not have 15 undergraduate semester hours in finance must
complete FINA 607, FINA 620 and FINA 650 (or their equivalent) with a grade of B or better in
each course.
Requirements
FINA 555 - Analysis of Derivative Securities
FINA 560 - Financial Markets and Investments
FINA 575 - Financial Data Analysis
COLLEGE OF BUSINESS
Curriculum Committee
September 27, 2011
Page 3 of 4
2011-12 #3
FINA 603 - Seminar in Financial Research
FINA 622 - Security Analysis
FINA 623 - Investment Management
FINA 630 - Analysis of Fixed Income Securities
FINA 662 - Financial Management Strategies
FINA 674 – Financial Risk Management I
FINA 688 – Financial Risk Management II
↓
Course List (FINA)
↓
Rationale: Over the last several years we have witnessed seismic shifts in the finance industry. Years of ever
increasing asset prices and greater and greater risk-taking supported by the engineering of ever more complex
financial derivatives have given way to plunging asset values and unprecedented timidity and trepidation.
Thoughtful investors and decision makers have always been mindful of the need to assess and address the risks
associated with their actions and positions, but in the aftermath of the (continuing?) financial crisis, business
entities of all types are increasingly emphasizing and analyzing the financial risks to which they are exposed.
NIU Department of Finance Board of Executive Advisors Identifies Shift towards Hiring graduates trained in Risk
Management
Discussions with financial executives from banking, corporate treasury, and investments (many of whom serve on
the NIU Department of Finance Board of Executive Advisors) have shown that while the level of hiring for entry
level finance positions has been increasing in recent years, there has also been a shift in emphasis in terms of the
types of positions firms are trying to fill, with many more firms specifically seeking candidates with training in
financial risk management.
“Financial risk management is the process by which financial risks are identified, assessed, measured, and
managed in order to create economic value,” (Jorion, 2011).
Growth in Risk Management Certification: increasing demand for focused professionals
The MS in FRM program would prepare students for careers in risk management by providing them an in-depth
understanding of the latest risk management techniques and a grounding in the use of sophisticated hedging
instruments and financial derivatives, including swaps, futures, and options. In addition, students who successfully
complete the curriculum will be fully prepared to take and pass the exams leading to the professional certification
known as the Financial Risk Manager (or FRM).
The FRM designation is recognized, globally, as the premier certification for those in the Financial Risk
Management Profession. There are over 26,000 professionals who hold the FRM designation, many of whom work
in the top banking and financial institutions in the United States. The program for receiving the designation is
considered rigorous and pass rates, over the last three years, for the two required exams range from only 39% to
53%.
We fully expect that a graduating MS FRM student would not only have the MS degree, but would also be well
prepared to acquire the FRM designation.
Bureau of Labor Statistics Highlights Forecasts Growth in Demand for Risk Management
Positions that involve financial risk management, profiled in the Occupation Outlook Handbook, 2010-2011 edition
(OOH), published by the Bureau of Labor Statistics (BLS), include financial managers and financial analysts. The
entries note the following in regard to risk management.
COLLEGE OF BUSINESS
Curriculum Committee
September 27, 2011
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2011-12 #3
The OOH entry for Financial Analysts notes, “Risk analysts evaluate the risk of portfolio decisions, project
potential losses, and determine how to limit potential losses and volatility using diversification, currency futures,
derivatives, short selling, and other investment decisions.” It goes on to note, “Many positions require master’s
degrees in finance… Positions may also require professional licenses and certifications.” Further, “…a master’s
degree in finance is often required. Advanced courses or knowledge of option pricing, bond valuation, and risk
management are important.” The OOH further notes that for financial analysts, “certifications enhance
professional standing and are recommended by employers. Certifications are becoming increasingly common.”
And more specifically, “Additional certifications are helpful for financial analysts who specialize in specific areas,
such as risk management.”
Finally, the OOH entry for financial analysts goes on to note, “overall employment of financial analysts is expected
to increase by 20 percent during the 2008-2018 decade, which is much faster than the average for all
occupations…Certifications and graduate degrees…significantly improve an applicant’s prospects.”
The OOH entry for Financial Managers echoes that for Financial Analysts, and notes the following, “Many
[financial managers] have a master’s degree or professional certification…many employers now seek graduates
with a master’s degree, preferably in business administration, finance, or economics. These academic programs
develop analytical skills and teach financial analysis methods and technology… Financial managers may broaden
their skills and exhibit their competency by attaining professional certifications… [financial mangers] must cope
with the growing complexity of global trade, changes in Federal and state laws and regulations, and the
proliferation of new and complex financial instruments.”
With regard to employment prospects, the OOH entry for financial managers notes the following,
“Employment growth for financial managers is expected to be as fast as the average for all
occupations. However, applicants will likely face keen competition for jobs. Those with a master’s
degree and certification will have the best opportunities (emphasis added).”
Furthermore,
“employment of risk managers, who assess risk for insurance and investment purposes, also will
grow.”
And,
“candidates with expertise in accounting and finance—particularly those with a master’s degree and
certification—should enjoy the best job prospects. An understanding of international finance,
derivatives, and complex financial instruments is important (emphasis added).”
Thus, a master’s program focused on financial risk management that entails a deep grounding in the latest hedging
techniques and an understanding of the increasingly complex financial instruments used in risk mitigation, which
also prepares students for a professional certification as a Financial Risk Manager, would seem to best position our
students for those jobs for which there is the greatest demand in the financial sector.