Risk Bearing Capacity

Risk Bearing Capacity (RBC) can be used in the process of defining the firm’s risk appetite and tolerance to the financial impact of risk.

Objective

• Define the risk-bearing capacity (RBC or maximum retention capacity) of the Group taking into consideration its internal culture, structure and strategy.
• Identify what level of retained risk generates a sustainable impact and above what level the risks have to be transferred to third parties.

Approach

• Identification of the maximum retention capacity at group level in the view of minimizing the Total Cost of Risk.
• Establishment of Key Performance Indicators (KPI).
• Impact Analysis and Stress Testing.

Further developments

• Review of the Risk Appetite of the Group to determine the maximum amount the Group would accept to put at stake. This limit depends mostly on the strategic objectives of the Group.
• Estimate the risk tolerance of the Group by combining its risk bearing capacity and its risk appetite.