Capital Management

From Open Risk Manual


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


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

See Also