Management is fundamentally the process of coordinating and overseeing the work of others to achieve organizational goals efficiently and effectively. It involves the systematic application of various functions—planning, organizing, leading, and controlling—to guide people and resources towards the attainment of specific objectives. In essence, management is about getting things done through others by optimizing available…
Risk-Adjusted Return on Capital (RAROC) is defined as the ratio of risk-adjusted return to economic capital (EC). Economic capital refers to the amount of capital that a bank or financial institution needs to ensure its survival in extreme, worst-case scenarios. It acts as a financial buffer against unexpected shocks in market conditions. Banks must assess…
Risk Aggregation: An Overview Risk aggregation refers to the systematic process of combining various individual risks to assess the total risk exposure of an organization. This process involves identifying and quantifying distinct risk types—such as credit, market, operational, and liquidity risks—and analyzing their interdependencies. The goal is to derive a consolidated risk profile that supports…
Risk-Adjusted Return on Capital (RAROC) is a risk-based profitability measurement framework that evaluates financial performance on a risk-adjusted basis. It provides a consistent metric to assess profitability across different business lines and asset classes, enabling better capital allocation and pricing decisions. RBI Guidelines on Asset Acquisition and Pricing As per the Reserve Bank of India…
