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NOTES ON CONCEPT OF MID OFFICE | RISK MANAGEMENT NOV 2022

CONCEPT OF MID OFFICE

In this article, we discuss Concept of Mid Office, CAIIB exam Nov 2022, IIBF CAIIB study material 2022 & free notes on risk management for November 2022 Exams.

IIBF is responsible for conducting various flagship courses, and the CAIIB exam is one of them. CAIIB exam is held twice a year, in June and November. CAIIB exam Nov 2022 aims at providing knowledge about treasury, risk management, human resource management, retail banking, etc. which would help you make better decisions in different areas.

Only candidates who have cleared the JAIIB exam are eligible to appear in the CAIIB exam 2022. This exam is beneficial for candidates in the banking sector as it can lead to promotions, salary increments, and various other opportunities to help them move forward in their careers. CAIIB exam nov 2022 comprises two mandatory papers – ABM and BFM and one elective paper. You can choose from the six options according to your convenience, Risk Management, human resource management, rural banking, retail banking, Central Banking, and information technology. 

To ace the CAIIB exam 2022 to be held in November, you would need all the help you can get. We, at learning sessions, have devised a CAIIB study material nov 2022 according to the latest CAIIB syllabus in November 2022. In our CAIIB material 2022, we provide you with various services, including video lectures, CAIIB mock tests, and free notes for all the subjects. We will discuss our CAIIB study material 2022 later in this article.

This article will give you short and brief notes on the concept of mid-office. However, it is one of the most important topics of the elective subject (Risk management) of the CAIIB exam Nov 2022. So first, we would like to tell you about risk management before moving on with our topic. 

Risk management

Identification, evaluation, and control of risks to an organization’s resources and profits are steps in the risk management process. These risks have many different causes, such as monetary unpredictability, legal responsibilities, technological problems, strategic management blunders, accidents, and natural calamities. An effective risk management programme aids a business in considering all of the risks it confronts. Risk management also looks at how risks relate to potential negative effects on an organization’s strategic goals.

Read Also: CAIIB RISK MANAGEMENT MOCK TEST 2022

The Middle Office

A department within a financial services organisation is called the middle office. It comprises a group of workers, including risk managers, IT officers, and other officers who oversee hazards inside the company and information technology.

The Process

There are three primary divisions in a financial services organisation, such as an investment bank or hedge fund: the front office, the middle office, and the back office. The department that interacts with customers and generates revenue for the financial institution is the front office. It provides financial products that clients can purchase, directly assisting both private individuals and businesses.

By providing risk management, IT, and legal services, the middle office assists the front office division. The department ensures that the contracts and deals made by the front office adhere to all applicable legal standards. The front office’s profits or losses are likewise calculated in the middle office.

The back office, sometimes known as the “engine room,” is responsible for the financial institution’s settlements, record-keeping, accounting, human resources, and regulatory compliance.

Background on the Middle Office

In the context of foreign exchange and investment banking, the phrase “middle office” was first used in 1868. During that time, gold and silver served as the accepted units of measurement for international trade. The front office of banks was mostly made up of salespeople and traders who worked directly with customers, while the back office consisted of other employees.

The back office, on the other hand, was made up of clerical staff who supported the front office. Calculating gains and losses from commerce between merchants or nations was the responsibility of the middle office division.

After the invention of paper money, banks let businesses and government organisations to trade securities and raise money to finance commerce. Banks served as a middleman between securities traders and customers, earning money by levying commission fees on profitable trades.

Banks divided the back office to create a middle office division to oversee the transactions carried out by the front office as the banking industry underwent a revolution. The necessity for financial organisations to better manage their risks and the increasing complexity of financial transactions led to the development of the middle office.

Roles of the Middle Office Staff Members of the middle office carry out tasks that assist the front office’s operations in a number of fields, including risk management, financial control, strategic management, and information technology.

Employees in the department make sure that all compliance documentation are filled out completely and precisely, as well as that the transactions made by the front office are accurately documented and processed. Additionally, they give market data to the front office on different securities and financial markets to assist risk managers in reducing investment risks that the institution is susceptible to.

The middle office may have a dedicated legal staff that ensures the contracts adhere to the law and accept business practices. The accounting team prepares financial statements in accordance with current financial reporting requirements, performing the financial control function. Software to manage trade activity is created by IT professionals.

Because it handles tasks that the back office formerly handled, the middle office is occasionally perceived as an extension of that department. However, the middle office serves as a vital link between the front office and the back office, helping both divisions by gathering and keeping track of crucial market data.

Prerequisites for Middle Office Staff

There were only the front office and the back office within banks in the early days of investment banking. The minimum educational requirement for front-office staff was a college degree, while the minimum educational requirement for back-office staff was a high school diploma.

Since front-office staff dealt directly with clients, they needed to be more qualified than back-office staff, who handled clerical work. But as technology advanced and transaction complexity rose, the back office was divided to become the middle office division. The division requires all employees to hold a bachelor’s degree, an MBA, and other postgraduate degrees.

Changes in Middle Offices

The majority of banks are automating their internal processes as a result of technological advancements, and humans are being replaced in all three divisions. For instance, to improve productivity and lower operating expenses, Goldman Sachs replaced most of its equity traders with electronic trading platforms. Computer systems have taken over the roles once held by traders, salespeople, compliance officers, and risk specialists.

However, businesses that kept the middle office division outsource some of their tasks to firms to gain specialised knowledge and cut expenses. Other businesses are outsourcing part of their middle office tasks to nations with highly educated and skilled workers but much lower pay scales.

Read Also: CAIIB RISK MANAGEMENT PATTERN, PASSING CRITERIA

CAIIB STUDY MATERIAL 2022

Our experts have used all the latest resources and CAIIB syllabus 2022 to develop the CAIIB study material for the CAIIB exam in November 2022

We offer video lectures that can be downloaded along with complementary short notes in the form of epdfs that are accessible through our applications, for which the links are provided at the end of the post. Along with recorded video lectures, we also conduct live sessions of CAIIB. Videos and notes are available for all the subjects of the CAIIB exam Nov 2022. The playback speed of our lectures can be increased or decreased by 2X according to your convenience. 

Our short and easy notes would help you revise the topics in a short time. Our video lectures are the best material there is as it would clear your concepts, and all the issues at the end of your preparation would be on your tips if you use our CAIIB study material 2022

Additionally, we offer free CAIIB mock tests that you can do a total of five times in order to improve your performance on the CAIIB exam in November 2022. These mock tests help you give an idea about the level of difficulty of questions and help you get over your exam jitters by getting you familiar with the exam pattern, questions, and the time limit that will be there on the actual exam day. 

All the best for your preparation for the CAIIB exam Nov 2022.

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