Value and capital management : a handbook for the finance by Thomas C. Wilson

By Thomas C. Wilson

"A price administration framework designed in particular for banking and assurance the price administration instruction manual is a accomplished, sensible reference written in particular for financial institution and coverage valuation and price administration. Spelling out how the finance and hazard capabilities upload price of their respective spheres, this booklet provides a framework for measuring - and extra importantly, influencing - the price of the firm Read more...

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a price administration framework designed in particular for banking and assurance the price administration guide is a entire, functional reference written particularly for financial institution and insurance Read more...

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Extra info for Value and capital management : a handbook for the finance and risk functions of financial institutions

Sample text

A conglomerate discount can occur if the relative value added from operational or financing synergies is outweighed by the increased complexity and weaker focus on value management inherent in large, complex firms. In general, the financial discipline imposed by capital markets is less effective for financial conglomerates: it is impossible for shareholders to “vote with their feet” or change the management of an individual business within a diversified financial services group. In addition, in contrast to mono-line firms, financial conglomerates become more opaque with segmentlevel information generally less available.

In response, banks and insurers have converged on internal RAPM and Economic Profit (EP) frameworks, which make the returns and risks of very different, highly complex financial businesses directly comparable. Unfortunately, RAPM frameworks can be complex, reflecting the complexity of the business, and in spite of the complexity, not all of them provide the “right” answer. In addition, the inherent complexity can make the link between RAPMs and shareholder value seem so tenuous to senior managers that they revert to a simpler paradigm to manage value – one of accounting earnings, earnings growth and P/E (price/earnings) multiples – even though, by ignoring capital and risk, the simpler approaches will lead almost certainly to the wrong decisions.

With business leaders, the Chief Underwriting Officer (CUO) and management committees (including the ALCO) in the design of the ERM framework and in taking better decisions. With the CEO, Executive Board and Supervisory Boards, on the assessment of the firm’s internal control and governance environment, on the firm’s risk profile and on management’s assessment of the risk profile and management actions.

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