Risk Management Watch: Risk Tops Corporate “To-Do” List
Risk continues to top the list of corporate priorities among companies in the financial sector as well as a growing number of non-financial businesses. A recent survey of leading figures in the financial services industry from global service provider, Omgeo, shows that nearly 90% of respondents are taking increased measures to protect their firms against risk. The survey also shows that risk mitigation is a priority among operations professionals. A separate joint survey conducted by IBM and the Securities Industry and Financial Markets Association (SIFMA) shows that despite billion-dollar write-downs, Wall Street firms continue to increase their technology spending, investing more in risk management initiatives, according to Wall Street & Technology.
Risk, however, is fast becoming a critical issue outside the financial sector as well. In fact, in a recent report, Financial Week quotes John Schwitz, an operations risk manager at Unisys, as saying that he expects risk management to gain the same stature in non-financial businesses within the next five years. Executive recruiting firm, A.E. Feldman, says now more than ever, firms are realizing the strategic importance of risk management jobs. The firm reports that a growing number of companies are expanding and reorganizing their risk teams in an effort restore confidence. Looking ahead, A.E. Feldman adds that senior communications and marketing professionals will also become hot commodities as firms reposition and rebrand themselves.
Risk Now a Top Priority
A recent survey of Omgeo’s Americas Advisory Board, which is comprised of leading investment managers, broker/dealers and custodians, has underlined the importance of risk mitigation as a top priority among executives. More than 88% of those polled say that in the wake of the Societe Generale scandal, they had taken immediate steps to improve communication between their front, middle and back offices in order to reduce risk. According to the study, “Such communication between counterparties is critical to risk management controls and the effectiveness of managerial procedures across all areas of the trading cycle.”
“It is very encouraging that nearly 90% percent of respondents are taking increased measures to protect their firms against risk,” stated Lee Cutrone, Omgeo’s Managing Director, Industry Relations. “The findings of our first Advisory Board Survey clearly indicate the importance of risk mitigation in the operational frameworks of sell side, buy side, and custodian firms alike. Particularly in such volatile times, we need to ensure that the market’s operational infrastructure is as shored up as possible. Indeed, it takes the entire industry’s cooperation, and the survey shows that this is understood across all parties,” Cutrone adds.
Firms Investing in Risk Initiatives
In a separate survey conducted by IBM and SIFMA, the majority of Wall Street firm respondents report their IT budgets were expected to remain the same and/or increase in size going into 2009, according to Wall Street & Technology. In fact, the report notes that smaller firms on Wall Street intend to be particularly aggressive, with half anticipating increased IT budgets in 2009, compared to only 8% who anticipate a decrease.
Wall Street & Technology quotes Randy Snook, Sr., Managing Director and Executive Vice President of SIFMA, as saying, “Although the majority of survey respondents believe the sub-prime crisis was caused by factors unrelated to technology, this crisis is serving as a catalyst to increase the amount of money invested in technology/risk management initiatives. At our member firms, people are being asked to do more with less and rely more heavily on technology. It is clear that changes are needed in our industry and that technology is an integral part of the answer but not the only answer. The anticipated technology investments are one of several important building blocks necessary to mitigate the financial impact of future disruptions.”
Risk Key in Non-Financial Businesses
Business schools are adding or expanding risk management programs aimed largely at Chief Risk Officers, auditors, IT specialists, financial engineers, directors and other top executives, according to Financial Week. The report states that, “Execs with risk management skills are in increasing demand as companies as diverse as food producer Heinz and truck maker Navistar add Chief Risk Officers to their senior management teams.”
Financial Week adds that the use of statistical models and probability can be used to quantify the financial risks presented by any number of variable costs, such as energy and raw materials, shipping and labor, or be extended to assess credit risk or declining demand.
To learn more or inquire about job trends in risk management the lines of communication are open. Contact the Mitch Feldman, President of A.E. Feldman, and the firm’s executive recruiting team here.
