| The Chief Risk Officer (CRO) is part of the CEO's | | | | added up and combined they become a serious |
| management team. At the end of the year, the CEO | | | | threat. |
| checks how he has done. How does he do that? | | | | In this configuration the CRO is responsible for the |
| What are the performance metrics of the CRO? And | | | | final architecture of the company; every part must |
| what role does the CRO play in the team? | | | | add up in accordance to the risk-return-profile. But is |
| Let's redo the film Wall Street and have a Chief Risk | | | | this something a risk manager can be responsible of? |
| Officer oppose against the CEO Michael Douglas, | | | | Interesting to find out is when someone becomes a |
| Who would you think would fit: | | | | risk manager? What is the path towards receiving |
| - Tom Cruise, Leonardo di Caprio, Jack Nicholson, ...? | | | | responsibility towards a company's overall risk-profile |
| There are many examples in the market of risk | | | | and making sure the people adhere to the |
| managers and the number of CRO increases over | | | | guide-lines? |
| time. | | | | Mr. Leach graduated from Brown University and |
| Mr. Brian Leach is a Chief Risk Officer at Citigroup and | | | | received an M.B.A. degree from Harvard University. |
| was previously employed at Morgan Stanley as a | | | | As an associate of Morgan Stanley he knows |
| Risk Manager. The term CRO stresses that the | | | | everything about finance, but that is when his career |
| position of risk management is seen to be more | | | | in managing risk starts. |
| important than simply managing risks. | | | | One of the biggest risks in this picture is the fact |
| In the news we read that he will lead Citi's efforts to | | | | that the CRO and the CEO know each other for |
| manage and track all risks undertaken by the | | | | long. "Mr. Leach worked alongside Pandit at Morgan |
| company... and "lead efforts to set strategic risk | | | | Stanley in the 1980s and 1990s before both men |
| parameters and will play a critical role in capital | | | | quit." (Leach was one of a team of Wall Street |
| allocation." (1) to make sure that growth opportunities | | | | executives appointed to oversee hedge fund |
| meet appropriate risk-return standards. | | | | Long-Term Capital Management LP as it unwound |
| Basically this states that a company is involved only in | | | | trades after collapsing in 1998)" (2) |
| activities that meet a certain profile (restated | | | | For managing risk, one could ask whether it is not |
| towards risk-return parameters). Is this new? No, but | | | | better to be enemies than friends, friendly enough to |
| it wasn't done before. | | | | persuade others: NOT TO TAKE THAT RISK. Then |
| One of the main challenges -- the risk of the individual | | | | there is the interaction with the CFO, who was |
| risk manager - is that risk is something hard to grasp. | | | | previously responsible for the risk of investments. |
| Individual activities may cause no harm but when | | | | A hell of a job. I think. |