┌─────────────────────────────────────────────────────────────────────────────┐
│                    KEY RISK CATEGORIES IN BANKING                        │
├─────────────────────────────────────────────────────────────────────────────┤
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    CREDIT RISK                                      │   │
│  │  Risk of borrower default.                                         │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    MARKET RISK                                      │   │
│  │  Risk of losses from market movements.                              │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    OPERATIONAL RISK                                 │   │
│  │  Risk of losses from inadequate processes, people, systems.        │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    LIQUIDITY RISK                                   │   │
│  │  Risk of inability to meet funding obligations.                     │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    CYBERSECURITY RISK                               │   │
│  │  Risk of cyber attacks and data breaches.                           │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    MODEL RISK                                       │   │
│  │  Risk of incorrect model outputs.                                   │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    THIRD-PARTY RISK                                 │   │
│  │  Risk of vendor and partner failures.                               │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
└─────────────────────────────────────────────────────────────────────────────┘

┌─────────────────────────────────────────────────────────────────────────────┐
│                    RISK MANAGEMENT PROCESS                                │
├─────────────────────────────────────────────────────────────────────────────┤
│                                                                             │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    RISK IDENTIFICATION                              │   │
│  │  Identify risks that could affect the bank.                         │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                    │                                        │
│                                    v                                        │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    RISK ASSESSMENT                                  │   │
│  │  Assess likelihood and impact of risks.                            │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                    │                                        │
│                                    v                                        │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    RISK MITIGATION                                  │   │
│  │  Implement controls and strategies to mitigate risks.              │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                    │                                        │
│                                    v                                        │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    RISK MONITORING                                  │   │
│  │  Monitor risks and controls continuously.                          │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                    │                                        │
│                                    v                                        │
│  ┌──────────────────────────────────────────────────────────────────────┐   │
│  │                    RISK REPORTING                                   │   │
│  │  Report to stakeholders and regulators.                            │   │
│  └──────────────────────────────────────────────────────────────────────┘   │
│                                                                             │
└─────────────────────────────────────────────────────────────────────────────┘

# ===================================================================
# MODULE 8, LESSON 1: DIGITAL BANKING RISK MANAGEMENT OVERVIEW
# ===================================================================

import pandas as pd
import numpy as np
import matplotlib.pyplot as plt
import seaborn as sns
from datetime import datetime
import warnings
warnings.filterwarnings('ignore')

print("="*70)
print("DIGITAL BANKING RISK MANAGEMENT – AN OVERVIEW")
print("="*70)

# ----------------------------------------------------------------
# PART A: RISK ASSESSMENT MATRIX
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART A: Risk Assessment Matrix")
print("-"*60)

# Define risks and their likelihood and impact
risks = pd.DataFrame({
    'Risk': [
        'Credit Default',
        'Market Volatility',
        'Operational Failure',
        'Liquidity Crisis',
        'Cyber Attack',
        'Model Error',
        'Third-Party Failure',
        'Regulatory Breach'
    ],
    'Likelihood (1-5)': [3, 4, 3, 2, 3, 2, 2, 2],
    'Impact (1-5)': [5, 5, 4, 5, 5, 4, 4, 5],
    'Risk Score': [15, 20, 12, 10, 15, 8, 8, 10],
    'Category': [
        'Credit', 'Market', 'Operational', 'Liquidity',
        'Cybersecurity', 'Model', 'Third-Party', 'Regulatory'
    ]
})

print("Risk Assessment Matrix:")
print(risks.to_string(index=False))

# Visualise
fig, axes = plt.subplots(1, 2, figsize=(14, 5))

# Risk Heatmap
ax = axes[0]
heatmap_data = pd.pivot_table(
    risks,
    values='Risk Score',
    index='Likelihood (1-5)',
    columns='Impact (1-5)',
    aggfunc='mean'
)
sns.heatmap(heatmap_data, annot=True, fmt='.0f', cmap='RdYlGn_r', ax=ax)
ax.set_title('Risk Heatmap')

# Risk by Category
ax = axes[1]
category_risk = risks.groupby('Category')['Risk Score'].sum().sort_values()
ax.barh(category_risk.index, category_risk.values, color='teal', alpha=0.7)
ax.set_xlabel('Total Risk Score')
ax.set_title('Risk Score by Category')
ax.grid(True, alpha=0.3)

plt.tight_layout()
plt.savefig('risk_assessment.png', dpi=300, bbox_inches='tight')
plt.show()
print("Risk assessment visualisation saved as 'risk_assessment.png'")

# ----------------------------------------------------------------
# PART B: THREE LINES OF DEFENCE
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART B: Three Lines of Defence")
print("-"*60)

lines_of_defence = {
    "1st Line – Business Units": {
        "Description": "Own and manage risks.",
        "Activities": [
            "Implement controls",
            "Manage operational risks",
            "Comply with policies"
        ]
    },
    "2nd Line – Risk Management": {
        "Description": "Oversee and monitor risks.",
        "Activities": [
            "Risk assessment",
            "Risk monitoring",
            "Policy development"
        ]
    },
    "3rd Line – Internal Audit": {
        "Description": "Independent assurance.",
        "Activities": [
            "Audit risk processes",
            "Independent review",
            "Report findings"
        ]
    }
}

print("Three Lines of Defence:")
for line, details in lines_of_defence.items():
    print(f"\n{line}:")
    print(f"  Description: {details['Description']}")
    print("  Activities:")
    for activity in details['Activities']:
        print(f"    • {activity}")

# ----------------------------------------------------------------
# PART C: RISK APPETITE AND TOLERANCE
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART C: Risk Appetite and Tolerance")
print("-"*60)

risk_appetite = pd.DataFrame({
    'Risk Category': ['Credit', 'Market', 'Operational', 'Liquidity', 'Cybersecurity', 'Model', 'Third-Party'],
    'Risk Appetite': ['Moderate', 'Low', 'Low', 'Low', 'Very Low', 'Low', 'Low'],
    'Risk Tolerance': [
        'PD < 3%',
        'VaR < 5%',
        'Loss < $10M',
        'LCR > 100%',
        'Zero breaches',
        'Model error < 0.5%',
        'Vendor failures < 2'
    ],
    'Current Status': ['Within', 'Within', 'Within', 'Exceeded', 'Within', 'Within', 'Within']
})

print("Risk Appetite and Tolerance:")
print(risk_appetite.to_string(index=False))

# ----------------------------------------------------------------
# PART D: RISK REGISTER
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART D: Risk Register")
print("-"*60)

risk_register = pd.DataFrame({
    'Risk ID': ['R001', 'R002', 'R003', 'R004', 'R005', 'R006', 'R007'],
    'Risk': [
        'Loan Defaults',
        'Interest Rate Risk',
        'IT System Failure',
        'Funding Shortfall',
        'Data Breach',
        'Model Error',
        'Vendor Failure'
    ],
    'Category': [
        'Credit', 'Market', 'Operational', 'Liquidity',
        'Cybersecurity', 'Model', 'Third-Party'
    ],
    'Likelihood': ['Medium', 'High', 'Medium', 'Low', 'Medium', 'Low', 'Low'],
    'Impact': ['High', 'High', 'Medium', 'High', 'High', 'Medium', 'High'],
    'Mitigation': [
        'Credit scoring, diversification',
        'Hedging, ALM',
        'Redundancy, BCP',
        'Liquidity buffer, stress testing',
        'Encryption, access controls',
        'Model validation, monitoring',
        'Due diligence, contracts'
    ],
    'Owner': [
        'Chief Credit Officer', 'Treasurer', 'CIO',
        'Treasurer', 'CISO', 'Head of Analytics', 'Procurement'
    ]
})

print("Risk Register:")
print(risk_register.to_string(index=False))

# ----------------------------------------------------------------
# PART E: RISK MANAGEMENT METRICS
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART E: Risk Management Metrics Dashboard")
print("-"*60)

risk_metrics = pd.DataFrame({
    'Metric': [
        'Risk Appetite Compliance',
        'Risk Event Frequency',
        'Risk Losses ($M)',
        'Risk Control Effectiveness',
        'Stress Test Capital Impact',
        'Liquidity Coverage Ratio',
        'Model Validation Coverage',
        'Third-Party Risk Score'
    ],
    'Current Value': [
        '92%',
        '15/year',
        '$12M',
        '78%',
        '3.2%',
        '115%',
        '65%',
        '72/100'
    ],
    'Target Value': [
        '> 95%',
        '< 10/year',
        '< $8M',
        '> 85%',
        '< 2.5%',
        '> 120%',
        '> 90%',
        '> 85/100'
    ],
    'Status': ['🟡', '🟡', '🟡', '🟡', '🟡', '🟡', '🔴', '🟡']
})

print("Risk Management Metrics Dashboard:")
print(risk_metrics.to_string(index=False))

# ----------------------------------------------------------------
# PART F: RISK MANAGEMENT ROADMAP
# ----------------------------------------------------------------

print("\n" + "-"*60)
print("PART F: Risk Management Roadmap")
print("-"*60)

roadmap = {
    "Phase 1 (0-6 months) – Foundation": {
        "Focus": "Build risk management foundation.",
        "Activities": [
            "Establish risk management framework.",
            "Develop risk appetite statement.",
            "Implement risk assessment process.",
            "Establish risk reporting."
        ],
        "Success Metrics": ["Risk framework approved", "Risk metrics defined"]
    },
    "Phase 2 (6-12 months) – Scale": {
        "Focus": "Scale risk management capabilities.",
        "Activities": [
            "Implement risk analytics.",
            "Enhance risk monitoring.",
            "Develop stress testing capabilities.",
            "Integrate risk with strategy."
        ],
        "Success Metrics": ["Risk monitoring automated", "Stress testing implemented"]
    },
    "Phase 3 (12-24 months) – Advanced": {
        "Focus": "Advanced risk management.",
        "Activities": [
            "Implement AI-powered risk analytics.",
            "Deploy predictive risk modelling.",
            "Build risk dashboards.",
            "Achieve regulatory excellence."
        ],
        "Success Metrics": ["Risk analytics advanced", "Regulatory compliance > 95%"]
    },
    "Phase 4 (24+ months) – Leadership": {
        "Focus": "Industry-leading risk management.",
        "Activities": [
            "Implement autonomous risk management.",
            "Build predictive risk intelligence.",
            "Achieve industry leadership.",
            "Establish risk culture."
        ],
        "Success Metrics": ["Industry-leading risk management", "Continuous improvement"]
    }
}

for phase, details in roadmap.items():
    print(f"\n{phase}:")
    print(f"  Focus: {details['Focus']}")
    print("  Activities:")
    for activity in details['Activities']:
        print(f"    • {activity}")
    print("  Success Metrics:")
    for metric in details['Success Metrics']:
        print(f"    • {metric}")

# ----------------------------------------------------------------
# PART G: SUMMARY AND RECOMMENDATIONS
# ----------------------------------------------------------------

print("\n" + "="*70)
print("PART G: Summary and Recommendations")
print("="*70)

print("""
Risk Management Overview – Key Takeaways:

1. Risk management is essential for capital adequacy, reputation, and regulatory compliance.
2. Key risk categories: credit, market, operational, liquidity, cybersecurity, model, third-party.
3. Risk management process: identification → assessment → mitigation → monitoring → reporting.
4. Three lines of defence: business units, risk management, internal audit.
5. Regulatory landscape: Basel III, SR 11-7, EBA, IFRS 9.
6. Key metrics: risk appetite compliance, risk event frequency, losses, control effectiveness.
7. Roadmap: foundation → scale → advanced → leadership.

Recommendations:
  - Establish a risk management framework.
  - Develop a risk appetite statement.
  - Implement risk assessment and monitoring.
  - Build risk analytics capabilities.
  - Ensure regulatory compliance.
  - Foster a risk-aware culture.
""")

print("="*70)
print("END OF LESSON 1 – MODULE 8")
print("="*70)