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GUEST COMMENT: What makes a good risk manager?

15 December 2008

Hugh Pye

The credit crunch has exposed extremes of good and bad risk management, and risk professionals are in the spotlight. Those who have coped most successfully with the market upheaval have certain abilities and strengths – what are they?

A synthesis of technical and analytical expertise with communication skills: Risk people who have both spotted the problem areas and highlighted them effectively have proven very valuable. Risk people don’t run the business, but if they can communicate clearly the right information in the right way, they can help those that do to do it better.

Courage and assertiveness: There have been countless stories over recent months of risk managers spotting problems and highlighting them, but being ignored or overruled by divisional line management.

Maybe they could have got their message across in a different way. Did they just email someone a report? Or did they proactively seek out the right people? Did they concisely articulate the issues and the scale of the potential problems, and then follow up tenaciously?

Awareness: Financial institutions have realised that the CRO needs to change, to become more business-savvy and better at strategy and leadership.

Risk managers can respond to this need by sharpening their commercial and business skills and becoming more aligned with what the front desk is doing.

And the good news is that those who can demonstrate this combination of skills and competencies will find themselves seriously in demand.

Hugh Pye is a partner in the financial services practice at search firm CTPartners.

Comments (9)

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• Comments 1 - 9 of 9

• Another huge pie in the sky from our friendly recruitment partner.  Does anyone believe this puff pastry any more ?

  giles.percy 15 Dec 2008

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• I'm a headhunter and can confirm that risk professionals are being increasingly asked for, albeit at senior/experienced levels.  Hugh's suggested personality characteristics are unusual for risk professionals and are highly regarded, especially in the more P&L-driven environments such as hedgefunds.
  
  So, yes: I believe him.  It matches what I'm seeing.

  dd 15 Dec 2008

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• I know of risk people who flagged up the credit problem early on, put their foot down, and got pushed out. What makes you think courage pays?

  Anon 15 Dec 2008

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• risk managers have not covered themselves in glory these recent times....there must be a number of risk people from various banks that must now be unemployable...most people have seen the problems coming for an age..how could they not ??

  artie 15 Dec 2008

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• It is simple really.
  
  When times (2003- 2006) were good no one cared about risk managers even when they had "good communication skills, assetiveness, awareness etc" . Now they are seen as key, because of  this is one time event. However, I think if a company does not have good risk management controls, a good risk manager will not have enough clout to push his agenda to the CFO, CIO, CEO level.
  
  Maybe this crisis will change most companies view on risk .

  Simple Really 15 Dec 2008

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• When the (trading) good times roll again  risk managers are going to be relegated to the back room once again. This is just a temporary phase.

  Riskier 15 Dec 2008

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• If this had been a normal downward blip in the cycle I would tend to agree this would just be temporary phase where ROs are in vogue and it is fashionable to actively discuss the requistite skill sets for a good RO. However this is not your normal down turn and events, recently capped by the quite frankly unbelievable actions of Madoff, will in my opinion change the regulatory landscape for Hedge funds for good. RO's will not just be a good person to role out during due diligence visits but a formal requirement with defined reporting lines and regulatory reporting responsibilities. The RO role will evolve much in the same way the Compliance role did following the events 10-12 years ago.

  Peter Cairns 16 Dec 2008

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• I was a risk professional who pointed out the incorrect valuations of CDOs, the risks of huge ABS holdings. long term business issues of CDO-squared and the short-comings in giving correct information of normal distribution pricing techniques for exotics right up to senior management in recorded documents and was offered the door.
  
  Why are hedge funds and banks hiring credit risk people for same kinds of models that have been proven not to works?
  
  Hedge funds only wanted the very basics in risk amagers to satisfy their pension fund clients.

  Kiran 16 Dec 2008

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• I have worked as a Risk Manager in Traded Derivatives  and subsequently as a Portfolio Manager.  The best paid Risk Managers I know were good communicators of news that was good for them and as part of that strategy they always allied themselves with the Front Office.  Those Risk Managers who questioned the value of the franchise that they worked in did not prosper.

  Anon 28 Jan 2009

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