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Risk-Adjusted Return on Capital (RAROC)
Our client is a Tier 2 Bank in Turkey who serve retail and commercial customers and has a global presence in the world.
Problem
The bank needed to compare return on capital of different products and portfolios to the risk taken to earn this return
Internal and external factors that impact the amount of risk
Action
Determined the hierarchical structures to be used by granular portfolio planning and Risk-Adjusted Return On Capital (RAROC) calculation engine
Calculated hierarchical income and expense distributions
Established a calculation infrastructure where risk costs will be determined and distributed on a balance sheet basis
Established the infrastructure to manage risk-weighted assets and creation of a RAROC calculation simulation module
Designed pricing modules including strategic reports and monitoring structure required for the pricing process
20
%
Increased profit
6
%
Reduced default rate
10
%
Reduced decline rate