Case Studies, Standards of Best Practice, Conduct and Ethics, and PRMIA Governance
Exam IV of the PRM certification tests a candidate’s knowledge and understanding of the Case Studies, Standards of Best Practice, Conduct and Ethics and PRMIA Governance.
Exam IV is where we study some failed practices, standards for the performance of the duties of a Professional Risk Manager, and the governance structure of our association, the Professional Risk Manager’s International Association.
The following syllabus and objective statements are as per the latest PRM Guide.
This case study consists of the “Report of the Board of Banking Supervision Inquiry into the Circumstances of the Collapse of Barings, 18 July 1995.”. Barings Bank collapsed in 1995 after one of the bank’s employees, Nick Leeson, lost £827 million ($1.3 billion) due to speculative investing, primarily in futures contracts, at the bank’s Singapore office.
National Australia Bank – FX Options
This case study consists of the “Investigation into foreign exchange losses at the National Australia Bank, 12 March 2004.”. In 2004, NAB discovered that as a result of unauthorised spot trades on its foreign currency options desk, losses totalling A$360 million had been covered up. The losses were a result of a failed speculative position where the traders falsified profits to trigger bonuses over a number of years. In order to actually generate the reported profits, the traders speculated on the US dollar, betting that it would rise against the Australian dollar and other currencies. In 2006, two former NAB foreign currency options traders were sentenced on charges brought by ASIC and incurred jail terms.