Risk-Adjusted Capital Management
Integrating risk in strategic decision-making
By applying a risk-adjusted lens to investment decisions, corporates are discovering the benefits of deploying capital on a risk-adjusted basis.
Every organization faces the risk of not meeting its strategic objectives. These risks are mostly dealt with after strategic decisions have been taken. Hence, the risk function retains little influence in navigating and managing these risks.
An inversion of the traditional risk management approach is necessary to ensure risk considerations inform strategic decisions at the outset. Embedding and accounting for the cost of risk during the strategic capital allocation process not only supports the risk function, but shifts risk to the centre of strategic decisions.