From strategy to tactics

The risk implications of business decisions came to the forefront in the 1980s. Then, Bankers Trust pioneered the use of risk-adjusted return on capital (Raroc) instead of simple return maximisation as a strategic decision tool. This was driven by the recognition that market perceptions of a company’s risk played a significant role in determining equity valuations. By the early 1990s, Raroc, or some variation thereof, had become widely accepted among financial institutions as the basis for m

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