A study for Risk Adjusted Return on Capital System for Financial Service Industry

• Main Authors: Wen-Tsong Lu, 盧文聰
• Other Authors: 黃崇興
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/67532787183607767035

碩士 === 國立臺灣大學 === 商學研究所 === 92 === Given the current trend on risk based governance, intense competition and the increasing pace of internationalization, there is continuing pressure for financial institutions in Taiwan to strengthen its internal risk management and capital management capabilities. This study attempts to understand the approach adopted by financial institutions in Taiwan on issues such as risk management, risk adjusted performance measurement and risk adjusted return on capital. The study also hopes to clarify the importance of risk adjusted return on capital and its role in an integrated risk management framework. The study is classified into the following key sections: 1.Changes and trends in regulations governing capital adequacy 2.Analyze how financial institutions currently manage credit, market and operational risk as well as the trends and developments going forward 3.Analyze the linkage between risk adjusted performance measurement, risk adjusted return on capital and shareholder value management The study is based largely on publicly available information and reports as well as practical knowledge and experience. The study shows that financial institutions need to have a more comprehensive monitoring framework. There is also a need to invest in risk management capabilities. While developing this framework, financial institutions need to consider the impact of risk adjusted return so as to develop a dynamic and consistent management environment. Risk management should be viewed as a shareholder value enhancing activity as compared to a more passive compliance driven activity. A summary of the key conclusions is as follow: 1.The local financial regulatory environment will continue to develop both in scope and depth and be more comprehensive going forward 2.Financial institutions in Taiwan should focus on the development of capital and risk management capabilities 3.The view on risk management should be geared towards shareholder value creation rather than mere compliance 4.There should be clear definition, guidelines and procedures on risk management. These procedures should also be effectively monitored and reported 5.The ability to measure and manage economic capital should continue to be the focus of risk management 6.The implementing of risk and capital management policies should take into account behavioral issues such as culture, organizational structure, operating environment etc