RaCAD is a top-to-bottom framework for aligning a bank's risk appetite with the group's portfolio strategy and implanting disciplines to manage risk, capital and liquidity throughout the organization. It then prescribes processes and procedures for guiding capital allocation to individual business units and monitoring how front-line managers use it in their day-to-day operating decisions.

Each element of RaCAD addresses an urgent issue banks will need to attend to. However, in interviews with Bain & Company, senior bank executives around the world identified six elements—highlighted with red dots in the framework shown here—as "hot spots" they are struggling with the most as they try to implement the approach.