cover Story
tive team,” says McKinsey & Co.’s Kevin offices of executive search firm Heidrick &
Buehler, a director in the firm’s New York Struggles. Holt, who specializes in financial
offices and a co-leader of its global risk services, including the firm’s risk-related
practice. “It’s very easy to blame the CRO practice, sees “heightened attention” now
when things go wrong.” being paid to risk management across the
Maureen Miskovic, executive vice board, and particularly by financial firms.
president and CRO of Boston’s State Street The conversations are “unprecedented,” he
Corp. (see CRO Interview, page 4), recalls says, and the search activity is also “fairly
that during an eight and a half year stint unprecedented.” Holt estimates that the
with S.G. Warburg in London, she took activity is running at three to four times the
on, in succession, responsibility for index rate of a year or two ago, while a “dramatic
derivatives, equity risk management, fixed- increase in demand” at the senior levels
income market risk management, counter- of risk management is being driven by a
party credit risk and liquidity risk. “I ended “redefinition of what risk means across the
up with the title group treasurer, while also industry.”
retaining market and credit risk responsibil- “What we’ve been doing in the past as
ity,” she says. “If it could go wrong, it was an industry was insufficient,” Holt states.
always on my watch.” “It’s broadly acknowledged that managing
Consultant Lam concludes that there has indeed been a risk as an isolated element did not work. Risk is a cultural
“failure in risk management:” in its systems, functions and and systemic issue.”
the way it was – and was not – carried out. Distilling a very “Every client is interested in what the other firms are
proportions. The industry response was insufficient.
complex set of circumstances, Lam says that companies
that fell short were either “risk ignorant” or “risk incompetent.” The ignorant “didn’t know what they didn’t know,”
such as how much exposure they had, or they didn’t ask the
right questions, or they relied on outside rating agencies or
financial models that used bad data. The incompetent, for
reasons that could have been rooted in a governance problem, misdirected financial incentives or executives turning a
blind eye, “had the information but didn’t act on it appropriately,” says Lam.
As people try to make sense of all that went wrong, how
it happened and, most important, what to do to prevent
recurrences, risk management has become even more of
a priority. Risk managers, too, are said to be in greater
demand, though the irony is inescapable: On the one hand,
risk management is seen as partly to blame for what happened, which could jeopardize risk managers’ standing if not
their jobs. On the other, it’s precisely because it may be to
blame that risk management – and risk managers – is said to
be needed more than ever before.
The financial crisis was a “compelling event of cataclysmic proportions,” says Tim Holt, a partner in the New York
Companies that stumbled were either
“risk ignorant” or “risk incompetent,”
says consultant and enterprise risk
management pioneer James Lam.
doing,” he continues. “They’re rethinking their strategies,
and how best to mobilize.” Less attention is being paid to
technical skill sets, and more to executive-level skill sets, and
talent-seeking clients are willing to pay up for it. Without giving specific numbers or ranges, Holt reckons that compensation is at an “all-time high,” 20 to 25 percent above where it
was only a couple of years ago.
Michael Woodrow, president of New York-based recruiting firm Risk Talent Associates, describes mid- to senior-level
managers as the “sweet spot” for his business. His clients run
the gamut from banks, investment banks and asset management firms, to global corporate clients, energy companies,
consulting firms and technology and software analytics
companies. Woodrow says he sees “an incredible amount of
firefighting going on” in the aftermath of the market melt-down. There is some hiring going on, by companies with an
international footprint and by commercial banks, he notes,
while many others have put things on hold.
Woodrow says one area where there is a decent amount
of search activity is credit risk management. He is involved
with a number of companies wanting to build out their credit risk functions and looking to hire mid-level risk managers
www.garp.com
FEBRUARY 2009 riSk profeSSional 13
