Market risk officers are overstretched, does anyone care?

by stonegatesearch

Throughout every sell-side market risk function I know pretty much every Managing Director (or equivalent) has been complaining about the amount of time they have to spend dealing with regulators. At first it was a period of major adjustment for the more senior executives as they had to work closely with the authorities. There was a view that this would blow over but after a few years it became apparent that they were not going to be solely inward-facing technical specialists anymore. Banks now appreciate that their senior risk specialists are the people regulators want to engage with.

To many people this has been a difficult addition to their remit as some in market risk and analytics are not natural socialisers and are unaccustomed to having outsiders question their methods and processes. As such we have seen a rise in the need to find people who have a more evolved soft skill-set (especially in analytics but that’s a different post): people who can work closely with external agencies, will patiently explain complex things to people with comparatively little understanding and not accuse others of idiocy because they happen to disagree!

 So, the job spec has altered and we have adjusted the talent pools to accommodate that, what’s the problem? The role profile has only expanded, their employers still expect these people to be senior risk officers with full oversight of what’s going on in their portfolios;  interacting with and understanding the needs of the front-office, IT, finance, treasury and management et al; making decisions with the business; managing people etc. To cap it all each of the those responsibilities has become harder, more laborious and more politically charged since the Crisis. 

I see a lot of people who have fully accepted that they really are externally-facing managers of big groups which are now right in the eye-line of the ex-Co and Board and while only a few are really good at this new job most are competent enough. Many would be much better at it if the legacy elements of their roles were trimmed back a little; it’s unrealistic to expect one person to do all or most of the above and not crack or drop a ball (or both) over time. Pretty much every bulge bracket bank’s risk function could use a couple more senior people to spread the load; if you want your head of market risk to manage and lead the people, be a point-person with regulators and have full oversight of the financial risks the bank carries isn’t it a bit unrealistic to expect them to get their hands dirty too?

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