Capital Management
From Open Risk Manual
Definition
Capital Management denotes the set of principles, tools and processes that underpin the management of a firm's financial liabilities. The concept and practice of capital management is particularly relevant for regulated financial institutions where maintaining Capital adequacy via the procurement of adequate Risk Capital is usually a key condition for being able to operate
Objectives
The high level objective of Capital Management is to manage the liabilities of the (financial) firm in a manner that is optimally aligned with
- the firm's assets (in particular their risk profile)
- the firm's business strategy
- overarching regulatory and/or market constraints
Functions and Processes
Capital Management is typically performed by a firm's treasury department. Key functions performed by capital management
- Execute the firm's overall Capital Strategy
- Issuance or repurchase of own debt or equity instruments
- Capital Allocation to units, regions etc
