Risk Management

Risk Management (Certificate) (Diploma)

The Graduate Diploma in Risk Management is a postgraduate program in integrated risk management. Courses for the program are offered by the Faculties of Science, Engineering, and Commerce. The program requires 48 units of credit and is normally completed in one year of full-time (or equivalent part-time) study. Students may be exempted from the fundamental knowledge courses where these topics have been studied during previous studies.

Given the global trend towards greater reliance on self-assessment, maintaining high levels of voluntary compliance is a critical issue for tax administrators. Further, tax administrators are faced with limited resources and in response have generally adopted a risk management approach to enforcement. From the perspective of taxpayers, self assessment places a greater compliance burden on them in terms of obligations and costs. Both tax administrators and taxpayers can adopt a range of strategies to manage risk, but to be effective, these strategies need to be underpinned by an understanding of what drives the behaviour of the other party and of the dynamics of the tax environment. The course draws on current best international practice in compliance management and allows students the opportunity to apply their learning in a range of contexts.

Course Objectives

Students will develop a deeper understanding of the decision making processes of the various stakeholders in the tax system and will have the opportunity to apply their learning in a variety of contexts. Students will also be critically examining current best practice in compliance management and reflecting on the appropriateness of various strategies to assess and manage tax risk from the perspectives of both taxpayer and tax administrator.

On successful completion of the course, students will be expected to be able to:
Explain the significance of the concept of risk management in taxation and the underlying reasons for its emergence
Demonstrate an understanding of taxpayer compliance behaviour based on contemporary research
Assess the appropriateness and effectiveness of risk management frameworks and strategies employed by tax administrators
Assess the appropriateness and effectiveness of risk-based frameworks and strategies employed by taxpayers to manage compliance with tax laws
Formulate informed and appropriate strategies by which the various parties can more effectively manage their respective risks over time taking into account the dynamics of the environment
Main Topics

The concept of tax risk management
Understanding taxpayer compliance behaviour
Enforcement frameworks for tax administrators
Risk management strategies for tax administrators
Risk management strategies for taxpayers

This course commences by examining the nature and scope of financial risk management as it applies to participants in financial markets. Given no arbitrage opportunities or risk neutral pricing as appropriate, the simplest forms of derivatives (forwards and futures) are then introduced in terms of the mechanics and strategies of these markets together with the theoretical pricing of forward/futures contracts. Given that a swap is nothing more than a convenient way of bundling forward contracts, an introductory exploration of the issues relating to interest rate and currency swaps is then undertaken although the detailed pricing of these instruments is left for a more advanced course. The varied world of options is then explored with particular emphasis on the mechanics of options markets and the properties and strategies of option contracts/positions. Both the binomial and Black-Scholes option pricing models are treated in detail together with variations in the application of these models to assets other than equities (stocks). The Greek Letters and Value at Risk are of considerable importance to derivative market makers and/or financial institutions and these concepts are then treated at the introductory level. The course concludes with a general treatment of risk management strategies and performance evaluation.

This course has been written from a financial planning perspective but can be taken by those with a general interest in risk management or by those specifically interested in the insurance aspects of financial planning. It does not contain any actuarial studies content. The general nature of risk and its management is explored, of which insurance is but one aspect. The economic output of insurance entities is discussed with reference to the life and general insurance industries, whose market structure is important from a pricing, conduct and performance perspective. The public face of insurance is its products, and most life, general, health and mandated policies are investigated with particular emphasis on legal and taxation aspects, as applicable to consumers and small business. The role and professional advice methodology of the insurance advisor is explored. Finally, regulation and compliance within the financial services sector in general and the insurance industry in particular is examined in some detail.

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