Implementing RAROC

For this assignment, you will write a three page research paper in which you describe an RAROC system for risk management and identify benefits and challenges of an RAROC system. In this paper, please address the following questions:

How would you define and describe a risk management system?
How would a risk management system differ for a bank/investment firm compared to a construction firm that has high risk investments?
Describe your firm’s current RAROC system?
What are the benefits and challenges of an RAROC system?

……………….Answer Preview……………….

RAROC stands for Risk Adjusted Return On Capital and it’s a risk based profitability measure for analyzing financial performance with regards to risk adjustments and profitability of a business. it is usual defined as the ratio of the adjusted returns to the economic capital. Economic capital is the amount of money needed by a business to survive in the worst case scenario. The RAROC has two elements…..

APA

977