Product Description

The typical financial executives 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.

Product Details

• Amazon Sales Rank: #100243 in Books
• Published on: 2004-03-03
• Original language: English, German
• Number of items: 1
• Binding: Hardcover
• 300 pages

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 executives 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.

About the Author
David Belmont is the Director of Group Risk Control for Nexgen Financial Solutions Group (NFS). NFS is a closely held, EU regulated financial services group active in global derivatives trading, structuring, and reinsurance. As Director of Group Risk, David is responsible for risk management of Nexgen Groups complete portfolio which includes credit derivatives, CLOs/CDOs, ART/CAT insurance derivatives, exotic structured equity derivatives, and speculative grade credits. The Nexgen Group companies include Nexgen Capital, Nexgen Holdings, and Nexgen Reinsurance. David reports directly to the Board of Nexgen Group. Prior to joining NFS, David was Director of Andersons Financial and Commodity Risk Consulting (FCRC) practice based in Singapore. The Singapore FCRC was the center of competence for Andersens risk consulting activities throughout Asia. As leader of the Singapore FCRC practice, David was a key member of the management of Andersen regionally. Before joining Andersen in 1999, David was the Asia/Pacific Regional Risk Manager for Cargill Financial Services, a multi billion dollar proprietary hedge fund concentrating on emerging markets. David has practical experience managing risk through periods of low liquidity and high volatility having been the Asia/Pacific risk manager through the recent Asian crisis and, previously, the Latin American risk manager through the Venezuelan and Mexican crises. Prior to his Risk Manager roles, David was a trader of structured emerging market derivative products. David has also underwritten emerging market sovereign risk at Citibank in New York.The geographic spread of his experience and responsibilities has extended from Pakistan and the Indian Subcontinent through South East Asia, to Greater China, Japan and Korea. Previous to coming to Asia, David was the Risk Manager for the Latin American portfolio of the Cargill Financial Services and worked extensively throughout Latin America.David has over 10 years of experience in managing risk in Emerging Markets.

Customer Reviews

Essential Reading for Risk Managers Implementing BIS 2
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.

Practical Application
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.

Timely and useful for bankers contemplating BIS 2
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.