Banks have been exposed to four significant and interconnected drivers of change, including (i) a stronger integration among national financial markets, (ii) “disintermediation”, (iii) the supervisors’ growing interest in capital adequacy, and (iv) the liberalisation of international capital flows.  These have strongly emphasised the relevance of risk and the ability of banks to create value for their shareholders.¹

However risk management should not be seen as a way to eliminate an organisation's exposure to risk. Quite the reverse: it should be all about exploiting risk exposures for maximum return and competitive advantage on the basis that a risky business strategy and plan should always carry the highest premium prices. In other words, the challenge is to strike the right balance between risk and reward.

In this context, financial performance measurement and risk management practices can no longer exist in a vacuum, as they are often interlinked and impact on other business lines as complexity and uncertainty increase. Traditional measures of profitability and financial performance must be adjusted for the risks inherent to the business and should be measured at various levels including organisational units, products or services, transactions and customers. 

We help organisations to optimise their capital structure and level of capitalisation by offering a range of approaches and optimisation procedures. These address various valid capital strategies and ensure that performance and risk measures are fully part of the shareholder-value-based management process. These can include:

• Determining the optimal level of capital required to meet regulatory requirements, ensure solvency, maintain external ratings and improve shareholder value;
• Defining and documenting the risk appetite, and providing a foundation for setting and allocating limits and capital;
• Designing, building and testing risk-based limit-setting systems, and aligning these with the strategic planning, risk and capital planning processes;
• Integrating strategic planning, target-setting, budgeting, forecasting, and performance management/monitoring into a single process incorporating risk measures;
• Producing integrated risk and financial reports that provide more reliable, transparent and meaningful business intelligence, supporting all levels in the organisation from transaction to portfolio level.
  

¹   Adapted from Resti A., Sironi A, Risk Management and Shareholders’ Value in Banking: from Risk
Measurement Models to Capital Allocation Policies, 2007.

Case studies

Economic Capital Risk based decision making and risk culture;

Basel II Advanced Internal Ratings (IRB) Approach;

Economic Capital Calculation and Management Data;

Basel II Subject Matter Expertise;

Credit Risk Model Validation;

Credit Risk Model Waiver Application Process;

Basel II Pillar 2 (ICAAP) Development and Execution;

Regulatory  Compliance Strategy - Internal Ratings (IRB) Approach;

Market Risk Diagnostic;

Basel II, Pillar 2 (ICAAP) Pre-Implementation Analysis;

Basel II, Pillar 2 (ICAAP) Pre-Implementation Analysis;

Basel II, Pillar 2 (ICAAP) Pre-Implementation Analysis;

Basel II, Pillar 2 ICAAP Diagnostic and Gap Analysis;

Basel II, Pillar 2 Pre-Implementation Analysis;

Basel II, Pillar 1 Reporting Analysis;

Review of foreign exchange risk management capability;

ICAAP diagnostic and gap analysis;

Operational risk management of the bank integration streams;

Global roll out of an Operational Risk Self Assessment Framework relating to key controls managed by Trading and Non-trading Front Office Supervisors;

Scenario Planning & Stress Testing;

Review of Internal Capital Adequacy Assessment Process, including Risk and Capital Strategy, Risk and Capital Policy and Liquidity Management Framework;

Development and Implementation of a Governance Structure and Risk Appetite and Limit Structure;

Global Risk and Capital Reporting;

Risk and Capital Reporting;

Review of Outsourcing Arrangements;

Risk Data Management Information and Reporting;

Credit Transformation Programme.