Risk appraisal

Our areas of expertise include:

• Risk management
• Risk based capital
• Individual Capital Adequacy (ICA)
• Basel II implementation
• Value at Risk calculations
• Risk modelling and optimisation
• Risk hedging through derivatives
• Understanding risk reward trade off

Regulatory Capital

Regulatory capital is required by all financial firms - including banks, building societies, insurers and fund managers. Its primary aim is to protect customers and policyholders in case the firm enters financial difficulty and so maintain the reputation of the financial industry. Capital requirements are a combination of formulaic requirements and self-assessment.

For banks, building societies and many investment managers, this self assessment is known as the Individual Capital Adequacy Assessment Process (ICAAP).

For insurers the self assessment is known as Individual Capital Adequacy (ICA). Our insurance team can assist with your ICA needs.

We believe the ICAAP, if done properly, can be a useful tool in managing your risk. Fundamental to this is choosing the right model structure. There are so many risks to consider, such as assets invested, internal fraud or IT failure, that an ICAAP model can very easily become unwieldy and difficult to understand.

By using LCP STRATA, our streamlined, real-time modelling tool, we can help you to fulfil your regulatory requirements and potentially reduce your regulatory capital by creating a hierarchical structure to group similar risks together. This means each part of the model is small enough to understand, but all the major risk relationships are included.

LCP STRATA can help to answer the following questions:

• What happens to our capital if we write more of a certain type of business?
• What impact does mitigating a risk have on our overall capital?
• Does spending money on reducing risk make sense?
• Where can we best spend our budget for reducing risk?