Why does Ofcom need to estimate the level of risk faced by firms and, based on this, what a reasonable rate of return is?
Measuring the relationship between risk and return provides an important input for a number of aspects of Ofcom’s work. For example, when Ofcom sets the level at which the firms it regulates are permitted to set charges, it needs to include a reasonable rate of return in these charges. Risk and return is also an important factor in other areas of Ofcom’s work, for example when calculating the value of a particular business or project in the context of licence applications.
