Environmental Forces: Economic Instability, Low Interest Rates, Change in Demographics, Continuing Regulatory Changes and Digital Evolution
Current Practices and their Shortcomings in Risk, Capital, Business-mix and Performance Management
Evolution of Economic Capital Measurement and Management
Integrated Capital Management: ICAAP and ORSA
Procyclicality Management: Developing a Coherent Risk Rating Framework for Risk Management, Capital Management, Stress Testing and IFRS 9 Purposes
Capital Optimisation and Business-mix Management
Performance, Profitability Management and Hurdle Rate
Optimal Management of the Interest Rate Risk in the Banking Book
Prudent LGD Estimation for Mortgages
Developing and Implementing Effective Fintech Strategies
Implementing IFRS 9 by Adapting AIRB Models
The tough macroeconomic environment combined with demanding regulatory changes are constraining capital and exerting a lot of pressure on ROE. In the previous chapters, we have discussed how banks and insurance companies, in response to these pressures, can re-engineer their capital, business-mix and performance management processes to enhance their ROE. In this chapter, we will discuss the necessary organisational re-alignments to support these processes.
We will first look at the evolving role of the corporate functions. Due to their elevated position, corporate functions need to play a critical role in ensuring consistency across the enterprise while capturing synergies among the different lines of business. In the pursuit of a common goal, corporate functions assume a pivotal role in performing enterprise-wide optimisation exercises that integrate such effects across different businesses and geographic regions of operation. It will be necessary for enterprise functions to set the course for the flotilla and ensure synchronised movement in the stormy seas of the increasingly competitive business environment.
We will examine the new partnership among the risk, finance and