Risk Management and Value Creation in Financial Institutions »

GERHARD SCHRoECK has been a senior management consultant with Oliver, Wyman & Company in Frankfurt and London since 1997, where his specialty is to advise financial institutions on risk management issues and value creation. He received his PhD in finance and his MA in business administration from the University of Augsburg, Germany, and an MBA from the Joseph M. Katz Graduate School of Business at the University of Pittsburgh.

Increased competition among banks as well as pressure from shareholders for superior returns have forced financial institutions to focus on managing their value. But the idea of viewing risk management activities in banks from a risk-return perspective-and hence in the context of value creation-has not been analyzed on an industry or bank level until very recently.

Risk Management and Value Creation in Financial Institutions offers a close look at this subject by exploring both the theory and practice of corporate risk management in financial institutions. Author Gerhard Schroeck lays the foundations for developing a model that would allow banks to identify comparative advantages, examining where they should concentrate their risk management activities and how they should structure them. The book's valuable insights provide financial intermediaries with a detailed analysis of the link between risk management and value creation, and will help them build economic value.

Schroeck starts with an investi-gation of this link by defining and discussing value maximization and risk management within a banking context. He also addresses whether there is empirical evidence that may connect the two. Schroeck then explores different financial theories on risk management and value creation, and shows you how to create a framework that encompasses both of them.

Risk Management and Value Creation in Financial Institutions moves forward to outline the fundamentals for effective risk measures and discusses how currently applied measures can help you consistently determine-in the context of a valuation framework-the various types of risk a bank faces. This comprehensive guide also investigates whether risk-adjusted performance measures, such as the widely known Risk-Adjusted Return on Capital (RAROC), are an adequate capital budgeting tool to measure economic performance of banks as well as identify value creation in them. Rounding out this comprehensive look at risk management and value creation in financial institutions, Schroeck shows you how to use the results gained from his analysis to make critical decisions on the relationship between risk management and value creation-from whether a bank should restructure to whether it should concentrate on its competitive advantages or divest, and much more.

Given the central role of risk in banks, understanding how to manage risk is crucial. Risk Management and Value Creation in Financial Institutions provides this understanding and gives you the knowledge to create economic value from prudent risk management.