Risk Professional, February 2009

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hen Matthew Feldman The path is not well-worn. Feldman came to the FHLB, became chief executive one of a network of government-sponsored housing finance officer of the Federal Home agencies, in 2003 as operations manager for its mortgage Loan Bank of Chicago last purchase program. He brought an MBA degree from North-

April, a barrier was break- western University’s Kellogg School of Management; 15 ing. Four years earlier, just years at the former Continental Illinois Bank (including time

six months after joining the bank as a senior vice president, spent as president of its Continental Trust Co. unit and as a Feldman was named chief risk officer. His rise from there to managing director for global trading and distribution for the executive vice president of operations and administration in bank); and eight years with Learning Insights, an e-learning 2006 and to CEO in 2008 represents a C-suite success story startup he co-founded, financed and headed. for the risk management profession, a signal of changing It wasn’t very long ago that risk managers had almost ex-times and a higher profile for a set of skills and expertise in clusively quantitative backgrounds, or were regarded within demand as never before. their organizations as back-office functionaries in audit- or “I always viewed risk as a business function, not just a risk compliance-related roles. In recent years, many risk pro-function,” says Feldman. fessionals have become increasingly involved in decision His ascent illustrates both how strategic a function risk making, and moving closer to, or, as Feldman demonstrates, management has become in recent years, and how high risk all the way to the top. In many instances they have also professionals have climbed in terms of corporate stature. Just been working to move their companies away from a siloed as the recent turmoil in financial markets has brought more approach to risk management and toward more integrated, scrutiny on the profession and its performance – whether for enterprise-wide models. That trend, too, has served to give better or worse – amid the economic downturn, so has risk risk managers more visibility.

The financial crisis was a compelling event of cataclysmic

management gained entry into the highest echelons of the The credit crisis that hit in 2007 thrust risk management business and financial world and its management conscious- and risk managers into the spotlight, where they remain. ness. “It may sound like a cliché, but the CRO almost has to Financial services companies, regulators and others have be the CEO,” says Richard Spillenkothen, a longtime Fed- been struggling throughout to understand how the risk eral Reserve banking regulator who is currently director of discipline – and the credit risk component, in particular – Deloitte & Touche’s regulatory and capital markets practice. got so terribly out of control. Look at the former giants that It wasn’t always so. Consider the career path of one risk have gone bankrupt, got acquired or had to be bailed out: management pioneer, James Lam, head of Boston-area Lehman Brothers, Morgan Stanley, Merrill Lynch & Co., consulting firm James Lam & Associates. The University of Bear Stearns, Citigroup and American International Group. California at Los Angeles MBA graduate is widely credited And those are just the U.S.-based, A-list players. All had risk with having coined the title CRO when he went to work in management programs and people in place. Not surpris-this capacity for FGIC Capital Markets Services, a GE Capi- ingly, what happened to them caused an earthquake of such tal company, in 1993. When asked what he wanted his title magnitude that the industry as a whole is still feeling the to be, Lam figured that a chief risk officer, or CRO, could do shocks, while fear, panic, anxiety and uncertainty pervade for risk management, what chief information officer, or CIO, Wall Street. was doing for technology: help to integrate the function All that has led to a lot of soul searching and, naturally, across the company and elevate it to the C-level agenda. finger pointing. Blame has been assigned to everything from In 1995, Lam moved to Fidelity Investments as its first regulatory ineptitude to misguided public policy goals to un-CRO. Lam, who counsels major financial institutions and bridled personal greed. Another of those targets – a break-corporations on risk management, describes the FHLB’s down in risk management – points up a downside of the risk Feldman as “one of the first examples” of a CRO becoming profession’s ascendancy: demoralization.