By Gerhard Schroeck
An research of the hyperlinks among danger administration and cost creationRisk administration and price production in monetary associations explores quite a few equipment that may be applied to create monetary price at monetary associations. This precious source exhibits how banks can use chance administration to create price for shareholders, addresses some great benefits of risk-adjusted go back on capital (RAROC) measures, and develops the principles for a version to spot comparative merits that come to be due to the risk-management judgements. it's the basically ebook wanted for banking executives drawn to the connection among chance administration and price construction.
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Additional info for Risk Management and Value Creation in Financial Institutions (Wiley Finance)
Sample text
13. 128See Foundations for Determining the Link between Risk Management and Value Creation 33 Choice of the Stakeholder Perspective As we have already identified above, there are various stakeholder interests in a bank. The different perspectives with regard to the goal of risk management are: ■ ■ ■ ■ ■ Firm value maximization: For obvious reasons, the shareholders’ interests mostly drive this perspective. Some authors express the opinion that in order to increase firm value, the goal of risk management should be to reduce the volatility of the firm’s value133 (also see above).
1100% 01-Jan-93 01-Jan-94 01-Jan-95 DJ EURO STOXX BANK - PRICE INDEX FORTIS B ING GROEP CERTS. 3 Best bank performers. Source: Datastream and author’s analysis. 4 Worst bank performers. Source: Datastream and author’s analysis. ”52 However, this book is not intended to address these questions. Rather, we will assume that value maximization is the ultimate goal in banking. 54 Additionally, we will have to clarify whether and how risk and its management are major influencing factors in this process.
Source: Datastream and author’s analysis. ”52 However, this book is not intended to address these questions. Rather, we will assume that value maximization is the ultimate goal in banking. 54 Additionally, we will have to clarify whether and how risk and its management are major influencing factors in this process. Other Stakeholders’ Interests in Banks As discussed previously, (firm) value maximization is—from a theoretical point of view—the ultimate objective of any corporation. 58 These other stakeholders (besides shareholders and manage- 52For a discussion of this point see Kim and Santomero (1988).