Value Added Risk Management in Financial Institutions: Leveraging Basel II & Risk Adjusted Performance Measurement (Wiley Finance) [Hardcover]

David P. Belmont (Author)

Book Description

Series: Wiley Finance | Publication Date: March 3, 2004

A new perspective on risk management
Risk management has evolved to address the more strategic issue of optimization of return on risk. This has been accompanied by statistical, mathematical, and financial techniques which-when actively applied-can aid an institution in producing disproportionately high returns on risk. Adding Value Through Risk Management aims to describe these techniques, illustrate their application, and discuss their strategic value for financial institutions.
David Belmont is Director of Group Risk Control for Nexgen Financial Solutions Group (NFS).

Editorial Reviews

From the Inside Flap

The typical financial executive’s view of the value of risk management in their financial institution is based on the belief that risk management focuses on loss avoidance. This view is based on the history of risk management being control focused. However, risk management has evolved rapidly to address the more strategic issue of optimization of return on risk. This evolutions has been accompanied by statistical, mathematical and financial techniques which, when actively applied, can produce disproportionately high return on risk.

Given that financial institutions will have to make significant investments in their risk management systems to comply with the regulatory capital calculation requirements of BIS II, the book shows how to leverage this investment to extract shareholder value. Key concepts illustrated and explained in detail include:

• Opportunity costs of capital
• Economic profit
• Risk adjusted returns on capital
• Economic capital measurement and their relationship to economic capital allocation
• Capital structuring
• Capital budgeting

The use of risk adjusted performance information in the formulation of management strategies that seek to optimize return to shareholders are discussed in depth and illustrated by practical case studies of several leading financial institutions. Finally, practical incentive and technology challenges are addressed and pragmatic recommendations for overcoming these challenges are given.

The book aims to describe these techniques, illustrate their application, and discuss their strategic value in the management of financial institutions.

From the Back Cover

The typical financial executive?s view of the value of risk management in their financial institution is based on the belief that risk management focuses on loss avoidance. This view is based on the history of risk management being control focused. However, risk management has evolved rapidly to address the more strategic issue of optimization of return on risk. This evolution has been accompanied by statistical, mathematical and financial techniques which when actively applied can direct an institution towards risk taking those activities, which produce disproportionately high returns on risk. The book aims to describe these techniques, illustrate their application, and discuss their strategic value in the management of financial institutions.

See all Editorial Reviews

Product Details

• Hardcover: 300 pages
• Publisher: Wiley; 1 edition (March 3, 2004)
• Language: English
• ISBN-10: 0470821159
• ISBN-13: 978-0470821152
• Product Dimensions: 6.5 x 1 x 9.2 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (5 customer reviews)
• Amazon Best Sellers Rank: #1,632,259 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

6 of 6 people found the following review helpful:

5.0 out of 5 stars Essential Reading for Risk Managers Implementing BIS 2, March 17, 2004

By 

William Shurnberg (USA) - See all my reviews

This review is from: Value Added Risk Management in Financial Institutions: Leveraging Basel II & Risk Adjusted Performance Measurement (Wiley Finance) (Hardcover)

Given the dual pressures banks face from regulators and investors to address the challenges of Basle 2 and create shareholder value, this book is highly relevant and timely. It provides practical, concise and real world guidance to any senior bank executive seeking to add value in his institution by optimizing the usage of economic capital. Economic capital based performance measures are clearly presented and illustrated with real life examples. Additionally, anyone implementing Basle 2 must ask how this can be done and what value it creates for the organization. This book provides the answers.

The book quickly gives a real world context the value of risk management information to bank CEOs, CFOs, institutional security analysts, and investors. It then goes on to demonstrate theoretically and practically how risk management information can be used to address key strategic decisions faced by senior bank management.

Any risk manager, CFO, or CEO in a financial institution should find this book valuable if they seek to create shareholder value in their institution. Similarly, anyone seeking to rise to the executive suite must understand the issues addressed in this well written book.

4 of 4 people found the following review helpful:

5.0 out of 5 stars Practical Application, March 22, 2004

By 

Jason C. Fisher - See all my reviews

This review is from: Value Added Risk Management in Financial Institutions: Leveraging Basel II & Risk Adjusted Performance Measurement (Wiley Finance) (Hardcover)

Belmont has done an exceptional job at communicating the importance and practical application of risk measures for today's business environment. The book offers the reader a thorough assessment of what banking executives face everyday and how best to manage these risk and regain the control necessary for any banking executive to grow its business without putting into jeopardy the best interest of its shareholders, which in no small measure is a testament to Belmont's clear understanding of the challenges faced by most executives and the demands they face in terms of managing near term performance goals with long term stability.

3 of 3 people found the following review helpful:

5.0 out of 5 stars Timely and useful for bankers contemplating BIS 2, April 14, 2004

By 

Edward W. Chin - See all my reviews

This review is from: Value Added Risk Management in Financial Institutions: Leveraging Basel II & Risk Adjusted Performance Measurement (Wiley Finance) (Hardcover)

Even without the incentives provided by the upcoming Basel 2 guidelines, this book is timely and convincingly puts forth the proposition that active risk management is in itself a valuable component in the creation of shareholder value. Returns on investment in more sophisticated tools for risk quantification will be enhanced when the information is not only used for performance measurement, but also for such shareholder value-added activities such as capital allocation and balance sheet structuring.

I recommend this book for all practitioners of risk management.