The board of a Bank or an Insurance Company manages the business as a portfolio of activities.

Each activity has a particular risk/return profile. Over and above the individual risk/return characteristics of these business units, there is the interaction of the elements of the portfolio: risk compensation, in the form of offsetting structural positions and correlation effects, and the consolidated performance of the whole.

Management needs to be able to make investment, optimisation and incentivisation decisions on the basis of both the stand alone and diversified risk return picture.

Raising funding and investing the proceeds in the right volumes and under the right financial conditions are separate but complementary aspects of the business of a Bank. Exactly the same applies to writing insurance contracts and investing the premia in the context of insurance. Co-ordinating the funds/premia gathering and investment activities is a central function that ensures that the best possible synergy is achieved when the Asset and Liability sides of the balance sheet are brought together.

Regulatory and accounting standards are converging on the economic capital and fair value metrics that are more and more widely used for internal portfolio optimisation. Therefore implementing a coherent risk/return measurement, monitoring and managing a framework capable of satisfying the requirements of all stakeholders has become a matter of extreme importance.

Finalyse has many years of experience of putting in place the risk and performance attribution methodologies, data organisation and measurement and reporting systems necessary to meet these various requirements in Banking, Insurance, Energy and Asset Management.