Risk Management Watch Demand for Risk Managers Grows

State Street joins the chorus of firms calling for increased focus on risk management as the bank addresses its off-balance sheet exposure to the subprime mortgage market. The U.S. custodian bank has appointed Maureen Miskovic to the newly created position of Chief Risk Officer. Miskovic, who is to report to State Street Chairman and CEO, Ronald Logue, will lead a global team of more than 250 multi-disciplinary enterprise risk professionals. She will also sit on State Street’s strategy and policy-making team.

Now more than ever, firms are realizing the strategic importance of risk management. Executive search firm, A.E. Feldman, says demand is surging for risk managers who have been tested by previous market cycles. Models alone do not tell the whole story. The firm says counterparty risk which was pushed aside for years, is also now in vogue.

Good Risk Management is Good Management

State Street is just one of many banks raising the profile of risk management across their business. “Maureen’s appointment builds on our already strong risk management culture and infrastructure,” says State Street CEO, Ronald Logue. “State Street has achieved considerable global growth over the past five years and in creating this role, we intend to focus the intellectual capital and leadership skills of this highly experienced industry veteran to advance the strategy for our risk organization at a time of unprecedented complexity and change within the financial services industry.”

Joining State Street, CIFG Holding, the holding company for CIFG’s financial guaranty subsidiaries, recently named David Rockwell to the position of Chief Risk Officer. The firm’s CEO, John Pizzarelli, says the addition of Rockwell will “help enormously in our efforts aimed at strengthening our risk management procedures.”

Citigroup also appointed, John Davidson, as Global Infrastructure Risk Director, according to Reuters. Davidson will report to Brian Leach, the bank’s new Chief Risk Officer.

Risk Management Embedded in Culture

Risk mitigation and compliance are the top risk management priorities among three key stakeholder groups: investors, senior executives and independent board members, according to a recent study conducted by Ernst & Young. The survey finds that just over a third of companies polled report that they are successfully managing risk. A significant number also view risk management as an important source of competitive advantage. Moreover, the E&Y survey demonstrates that stakeholders are consistent in their view that clear ownership of risk and effective communications are key factors for successful risk management.

Volcker: Don’t Rule Out Federal Support

Despite the increased emphasis on risk, former Fed Chairman, Paul A. Volcker, recently criticized mathematical models used by banks and the Bank for International Settlements in evaluating risks, according to Pensions & Investments. The report quotes Volcker as saying, “When ‘three-sigma events’ happen with great frequency, it tells you the models are no good.”

Mr. Volcker says financial engineering has shifted much of the risk to investors though instruments like collateralized debt obligations. P&I also states that Volcker believes the crisis is simply too threatening to rule out the possibility of government support.

http://blog.aefeldman.com/2008/04/15/risk-management-watch-demand-for-risk

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Risk Management Watch Demand for Risk Managers Grows