Assigning capital risk

The Capital Assignment sub-tab allows you to assign weightings to specific risk categories for the capital risk groups you created in the Capital Risk Setup sub-tab.

RPPS establishes the capital allocation rate based on a matrix of weighted business risk categories with sensitivity scores for each business risk specific to each capital risk group. By default, this tab displays data for the most recent month. To view or edit data for a different month, click the filter icon at the top-left of the page.

Some risk weights are included by default, but you can add or remove risk weights as needed.

Adding or modifying risk weights for a capital risk group

Each capital risk group may have more than one risk weight associated with it. You can assign a capital risk scale to each risk weight category associated with a capital risk group. You can set up the capital risk scale on the Capital Risk Setup tab.

To add or modify risk weights for each capital risk group established in the Capital Risk Setup tab:

1. Click + Add Risk Weight.
2. In the Name field, type a name for the risk weight.

3. In the Weight field, type a weight percentage for the risk.

   NOTE: The total combined percentage for all your risk weights must equal 100%.

4. Click Add .

Assigning a capital risk scale to a risk weight category

To assign a capital risk scale to a risk weight category:

1. Locate the desired risk group from the Capital Risk Groups column.
2. Click the drop-down in the Scale row and select the desired scale setting.
3. At the top-right of the page, click Save .

Default risk categories

The following table lists the risk categories used in RPPS.

Risk Category	Description
Credit	The risk that a borrower may not repay a loan in full, and the institution may lose part or all of the principal of the loan and/or the interest associated with the loan.
Interest rate	The risk that a loan or investment's value will change due to the change in the absolute level of interest rates and yield curve.
Liquidity	The ability to liquidate an asset or liability on the open market. Certain types of assets and liabilities are more difficult to liquidate, requiring the institution to hold a potentially undervalued instrument until maturity.
Transactions	The operational risk of any product or instrument. As in any organization, there is risk in maintaining branches and products or running an organization. It can also be defined as human risk or risk of human error.
Compliance	The risk that an institution has for breaking laws or, more likely, inadvertently not complying with government regulations. Different products will have more risk due to greater regulation on said products.
Strategic	The risk arises when the implementation of a business does not go according to the business model or plan. An institution’s strategy becomes less effective over time, and it struggles to reach its defined goals. Certain products may have the propensity to detract from the strategy of the institution.
Reputation	The threat or danger to the good name or standing of the institution. Reputation risk can occur through a number of ways; directly as the result of the actions of the company itself; indirectly through the actions of employees; or tangentially through other parties. Certain products will have greater reputation risk as they may require more detailed and/or ongoing contact with customers.