What Keeps Heads of Risk Management Awake at Night?

The role of Risk Managers was fundamentally changing

What was once considered as a supporting position has become central in the corporate environment of financial institutions. It is one of the most mentioned job titles. And it is one of the most challenging positions at least since markets have shifted to new regimes characterized by almost unimaginable anomalies.

The areas Risk Managers should pay attentions to

The corporate function. In general, one would say companies have only two key functions: marketing and innovation. But in financial institutions risk management is a strategic strength. It shall understand macroeconomic drivers of risk, the distinctive features of the regulatory environment, the connection between corporate finance and risk management decisions, ...

The analytical framework. Issues of methodologies, modeling challenges, data and information, media and communications, ...

Culture, governance and relationships. Defining risk appetites, communicate risk profiles, a culture of critical decision making and information, ..

The risk management role is so central, comprehensive and challenging. But, how many financial institutions do have Chief Risk Officers on the executive board?

As technology providers we deliver a core of the analytical platform. In this platform we have a role definition system that maps organizationals specifics into the system and we integrate it into a work flow. But the corporate interaction is built atop it.

However, we "see" that the importance of risk management is still underestimated in some places.

It's not just a number game and it is not an information jungle.

It is the search for optimal risk that contains engineering and production work on a corporate level.

In VaR of the jungle, I have taken Aaron Brown's metaphor of building a village based on risk decisions - where it shall be built, what fences need to be erected, how much uncleared danger will be accepted.

What if the risk manager of the tribe has made the recommendation and the chief ignores it and builds the village on another place and in a way that is accepted by the regulators, but let predators in unexpectedly ...?

One of the reasons, why we like to work for small and medium sized market participants: the understanding that our technology can not only help to get more insight swifter, but supporting decision making at the C level. Especially, when "Chief Executive Buyers" have selected us.