Derivatives and risk management

The global financial crisis has brought into sharp focus the need for sound risk management practices in all organisations including those in the public sector. This module will provide you with an understanding of the various financial risks faced by organisations and the ways in which those risks can be managed. The module will introduce key tools such as derivatives and risk mapping and also discuss the linkages of risk management with the organisational strategic plan. The module will also introduce enterprise risk management processes and the implications of International Financial Reporting Standards (IFRS) for financial risk management.

What you will study

The 2008 global financial crisis witnessed the near-systemic collapse of the banking system in many countries and significant resultant impact on non-financial firms - a crisis that was caused by flawed risk-management practices. Since then the focus of governments, regulators and those running private and public sector organisations has been on how risk management practices can be improved to avoid a repetition of those events. Derivatives, if properly used, can be a key element in reducing risk for many organisations. If improperly used however they can be what the famous American financier Warren Buffet called ‘weapons of mass destruction’.

You will examine the financial and non-financial risks faced by organisations, first by considering the nature of each risk and how exposure to that risk can be measured. This is important since management attention and risk management resources should focus on those risks that are both likely to arise and are potentially costly - perhaps fatal - to organisations. You will study various risk management techniques used to mitigate unwanted risk exposures. These methods include ‘hedging’ techniques and the use of derivatives.

You will explore the impact of behavioural finance theory on the way that risk exposures are perceived and managed. In addition to financial theory you will look at real cases encompassing both failures and successes in different aspects of risk management. You will also look at risk management across a number of organisations in both the private and public sectors since practices vary widely.

You will learn

This module aims to enable you to:

understand risk management
examine and understand equity and debt finance - both the forms they take and the processes for raising them
explain credit risk, liquidity risk, FX risk, interest rate risk, contingency risk and operational risk and help you understand how these risks can be measured and managed.

The module will enable you to develop the following skills and abilities:

understand how companies and public sector and ‘not-for-profit’ sector organisations raise finance
understand different features of financing instruments
undertake a ‘risk-mapping’ of a company or organisation
measure financial risks
understand how and why financial risks can be managed (with a focus on how derivatives and other financial instruments may be employed)
understand the implications of IFRS for financial risk management
appreciate the benefits of an integrated Enterprise Risk Management approach

Vocational relevance

Employment opportunities in the field of risk management are growing as a result of recent events. Derivatives and Risk Management will be of particular interest to you if you are working, or planning to work, in an organisation in the financial sector or in the finance division of a company or public sector/not-for-profit organisation. The subject matter of the course is, though, designed to be useful for managers and prospective managers whose immediate responsibilities are outside the domain of risk management. Given the growing catalogue of risk management failures in all sectors - and the growing emphasis being placed on effective risk management by all organisations - the content of this course will provide knowledge and skills that all effective managers should possess.

Entry

All entrants must hold a BA/BSc degree awarded by a recognised university, or equivalent.

Various higher education and professional qualifications are considered equivalent to a degree. If you hold a qualification that you believe is an equivalent level to a UK degree you should contact us. The Open University Business School Masters Programme Committee is responsible for judging whether applicants’ qualifications meet the requirements for admission.

You will also need an appropriate facility in English language, sufficient to be able to work effectively at postgraduate level; generally this means capability equivalent to an International English Language Test System (IELTS) score of 6.5. To assess your English language skills in relation to your proposed studies you can visit the IELTS website. If you think either of these possibilities may apply to you, please speak to an adviser.

It is strongly recommended that you are comfortable with the use of numerical methods and use of spreadsheets. If you are unsure about these skills we suggest you familiarise yourself with illustrative numerical skills and methods prior to study. To help you decide whether you are ready, you may want to try this diagnostic quiz.

If you have any doubt about the suitability of the course, please contact us.

Qualifications

B862 is an optional module in our:

Excluded combinations

Sometimes you will not be able to count a module towards a qualification if you have already taken another module with similar content. To check any excluded combinations relating to this module, visit our excluded combination finder or check with an adviser before registering.

If you have a disability

This module is delivered online and time spent using a computer and the internet will therefore be extensive. Written transcripts of any audio components are available, as are printable versions of the online text-based material. Some online material may not be available or fully accessible using a screen reader (and mathematical and scientific materials may be particularly difficult to read in this way). Alternative formats of the study materials may be available in the future. Our Services for disabled students website has the latest information about availability.

Study materials

What's included

You will have access to a module website with an extensive variety of specially written resources presented in different media (print and online) and designed exclusively for this module. This includes:

audio and video content
case studies
published articles
a week-by-week study planner
online tutorial access
access to The Open University library.

You will also be provided with a printed module book which is composed of CFA readings relevant to each unit of this module.

Computing requirements

Primary device – A desktop or laptop computer. It’s possible to access some materials on a mobile phone, tablet or Chromebook; however, they will not be suitable as your primary device.
Peripheral device – Headphones/earphones with a built-in microphone for online tutorials.
Our OU Study app operates on supported versions of Android and iOS.
Operating systems – Windows 11 or latest supported macOS. Microsoft will no longer support Windows 10 as of 14 October 2025.
Internet access – Broadband or mobile connection.
Browser – Google Chrome and Microsoft Edge are recommended. Mozilla Firefox and Safari may be suitable.

Teaching and assessment

Support from your tutor

Your tutor will help you with the study material, mark and comment on your assignments and provide advice and guidance. You will contact your tutor by email, telephone or via your tutor group forum on the module website.

Assessment

The assessment details for this module can be found in the facts box above. You must use the online eTMA system to submit your tutor-marked assignments (TMAs).

Future availability

Derivatives and risk management starts once a year – in May. This page describes the module that will start in May 2023 when we expect it to start for the last time. A replacement module is planned for May 2024.

Regulations

As a student of The Open University, you should be aware of the content of the academic regulations which are available on our Student Policies and Regulations website.