Business Unit/Product RAROC
Banks face the dual challenge of managing risk and evaluating performance across numerous business lines and products. Clearly, institutions need to substitute views of the businesses that merely reward growth with a system that accounts for risk. The concept of risk-adjusted return on capital has emerged as a powerful single measure that captures both risk and performance in a way that can be compared across the entire institution.
However, for various reasons, many institutions still calculate RAROC on a portfolio-wide basis, rather than at the more granular levels that would allow them to allocate their resources to their most effective uses and maximize the use of capital.
SunGard can help. SunGard’s Ambit Risk Consulting can help banks calculate return and capital usage by business line and product line, working with the bank to navigate the difficult estimation process for allocating income, costs, and capital along multiple dimensions and into the appropriate buckets.
Features
- Provides a robust and complete capital calculation framework and tested models for calculating the return at product and business unit level
- Can be implemented using enterprise-class software, empowering decision-makers with on-demand reporting of RAROC by a customizable set of dimensions.
- Optimizes RAROC within the portfolio at the business line and product level
- Allows constant monitoring of the RAROC of their businesses and products
Benefits
- Maximizes a bank’s use of its balance sheet
- Quickly make decisions to reallocate resources and capital that take advantage of changing market conditions, whether those conditions are good or bad
