Need for Senior Risk Management Professionals Continues Unabated
Following a record $9.83 billion fourth quarter loss, Citigroup replaced its Chief Risk Officer (CRO) for the second time in less than four months. Citi’s Chief Executive, Vikram Pandit, promoted Brian Leach to the bank’s top risk job. Leach replaces Jorge Bermudez, whom the bank said is retiring after serving at Chief Risk Officer since December 2007. (Dave Bushnell, Bermudez’s predecessor, was Citi’s Chief Administrative Officer and Chief Risk Officer for 22 years). In a statement Pandit reveals, “As our industry grapples with one of the most difficult periods in market history, we at Citi are moving aggressively to transform our risk management culture.”
In a show of this aggressive transformation, Citi also named four new senior risk managers all reporting to Leach. Executive search firm, A.E. Feldman, says right now, risk management is what it’s all about. According to a senior-level industry veteran and recruiter working with the recruiting firm, “The emphasis on risk is growing. It is more important now than ever before.” Demand for senior-level risk managers with the experience to detect early warning signs and deliver accurate trend analysis is soaring. Looking ahead, risk management opportunities will grow significantly as firms seek to expand and reorganize their risk management teams.
Brian Leach, Citigroup’s newly appointed Chief Risk Officer, was formerly a member of the bank’s risk advisory committee under Bermudez. Citi states that in his new role, Leach will “lead Citi’s efforts to manage and track all risks undertaken by the company. He will also lead efforts to set strategic risk parameters and will play a critical role in capital allocation to ensure that Citi takes advantage of growth opportunities that meet appropriate risk-return standards.” The promotion appears to be Pandit’s latest attempt to make his mark on Citigroup, after taking the helm back in December.
Citigroup also named Suneel Bakhshi , Chief Risk Officer of its Global Consumer group and Citibank NA. Citi also appointed three Risk Oversight Chiefs: Charles Monet in Capital Allocation, Greg Hawkins in Real Estate and Mortgages as well as Adil Nathani in Structured Credit.
The shakeup comes on the heels of Citigroup’s fourth quarter loss, which was the widest in its 196-year history, according to Bloomberg. The bank says the results reflect write-downs on subprime related direct exposures in fixed income markets and increased credit costs related to U.S. consumer loans. Looking ahead, Bloomberg also reports that Oppenheimer & Co.’s Meredith Whitney says Citigroup may post its second-straight quarterly loss because of writedowns on home-equity loans and junk-grade corporate loans, Whitney says the rate of loan losses is “grossly underestimated by consensus estimates” at Citigroup and other U.S. banks.
Overall the banking industry has already written off more than $140 billion tied to subprime mortgages, CDOs and highly leveraged loans, according to Reuters. Bond insurer Ambac Financial Group recently joined the chorus of firms adding new Chief Risk Officers, naming David Wallis to the newly created position last month. Morgan Stanley has hired several new risk managers. Merrill Lynch, CEO, John Thain, also says he is fundamentally changing the firm’s risk management process. He has already created two Chief Risk Officer positions reporting directly to him.
Meanwhile, Societe Generale had its lax risk-management practices exposed following a $7.2 billion trading loss stemming from unauthorized bets by a rogue trader. In the wake of the scandal at France’s second largest bank, firms are not only adding new CRO positions, but scrutinizing potential candidates more closely. According to an Investment News report, the realization that hiring practices are key to avoiding scandals has come into focus. The report states that psychological profiling and screening of potential employees have become important tools in crisis prevention and risk management.
A.E. Feldman says that risk management jobs are opening up. Demand for new Chief Risk Officers and Senior Risk Managers will continue unabated as financial institutions expand and reorganize their risk teams in an effort restore confidence. Experience however is essential. Firms are on the hunt for risk managers who have been tested by previous market cycles. Looking ahead, A.E. Feldman adds that senior communications and marketing professionals will also become hot commodities as firms reposition and rebrand themselves.
