Risk Professional, February 2009

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that have been recruiting in the last couple of years, a couple of factors have become very obvious. One is demand for hands-on risk management experience. The other is the desire to bring diversity to boardrooms. State Street at the same time was trying to have its

director to CRO?

At the end of an entrepreneurial path of my career, thinking about what I wanted to do next, it was beginning to be obvious that it was a good time to come back to risk management. So I started talking to the [State Street

There is no one size that fits all.

Boards approach risk management oversight in very different ways.

board reflect its aspiration to generate about half of revenues from outside the U.S. I was one of three directors who joined the board at the same time, each with European backgrounds, and I had worked with the other two in a previous life: Amelia Fawcett at Morgan Stanley [she is chairman of Pensions First and former vice chairman and COO, Morgan Stanley International] and Peter Coym at Lehman Brothers [retired head of Lehman in Germany].

In general, are boards of directors paying more attention to risk?

I have done a number of speaking engagements in recent months. One reason I am invited is that I have this experience as a risk expert both sitting on boards and as a practitioner. As I sit in these forums or on panels, I would say there is no one size that fits all. They approach risk management oversight in very different ways, and there are searches under way as to what is the right approach to take. At State Street there is an executive committee that includes risk oversight, and at NRG I actually chaired a risk committee.

board’s] nominating and corporate governance committee and to [chair-man and CEO] Ron Logue, giving a heads-up that I thought I’d be coming back to finance. That raised the possibility that I might be conflicted in continuing to sit on the board. There was a moment when they said, “ Maybe there would be a great role for you here. While we have a well built-out risk management organization, which numbers about 300 people, it would be great to have someone with your skills sitting on our operating group.” So not only would there continue to be good, defensive risk management, but this would add risk management to strategic decision making. There was a real meeting of minds and serendipity in that I was available at the same time Ron was thinking about having a chief risk officer in the operating group.

Is there a central committee or council responsible for risk oversight?

One of the strengths of State Street – and I contrast this to investment banks I have worked in – is that there is far less internal politics and attachment to fief-doms, and there is constant dialogue. We have formal lines of communication, which you have to have when you are constituted as a bank, represented by our risk committee, asset-liability committee and operating group meetings. We also have a meeting, which I chair every Tuesday just before the operating group meets, on what’s going on in the market and where the major risks are. There is no fixed agenda. Every part of the company is represented – it includes the chief economist and some investment folks from State Street Global Advisors, the head of our securities finance and investment services business, the chief legal counsel and CFO, and others – and anybody can put any issue on the table. Between the formal and informal lines of communication, people generally try to keep each other informed. It’s an information-sharing culture, which helps the risk management effort tremendously.

How did you get from State Street

How dispersed are the 300 people in risk management?

We don’t have risk managers in all 26 countries; some of those offices are quite small. But in all of the major areas where we have custody, asset management or global markets operations, we have risk managers.

What is the state of education and expertise among people in the risk management discipline?

After the last year and a half and the revolution we are experiencing in the financial services industry, everything is going to be different. It’s not as though somebody moved my cheese into another room; it’s been moved to another planet. There have been a number of fingers pointing at the failure of risk management – and I would understand that in the broadest terms,