Office of Student Activities & Involvement

Risk Management

Lessons Learned:

Risk Management Lessons Worth Remembering

By Ben Golub and Conan Crum (Blackrock)

  • Risk management requires institutional buy - in
  • The alignment and management of institutional interests are critical to risk management
  • Institutions need an independent risk management organization with strong subject – matter expertise
  • Institutions need to understand their fiduciary responsibilities to their clients
  • While a top - down perspective is necessary, a bottom - up risk management process is vital
  • Institutions need to get portfolio managers to think like risk managers
  • Risk models require vigilance and skepticism
  • Institutional risk management does not mean risk avoidance

Impact on the Practice of Risk Management:

  • Accountability at all levels
    • Greater participation from senior management
    • Stronger risk cultures
  • Greater emphasis on big picture, integration
    • New regulatory initiatives
  • Identified need for better understanding

Tasks Identified as Important and Frequent:

  • Data Collection
    • Gather internal (position) data and external (market) data
    • Validate data
  • Modeling and Analysis
    • Identify risk exposure and risk factors
    • Conduct stress and scenario analyses
  • Communication and Reporting
    • Identify risk tolerance
    • Gather policy and regulatory information
    • Develop risk reports, presentations, etc.

(New) Requirements of a Risk Manager:

  • Being able to determine the applicability, sufficiency and validity of an existing risk model, understanding its limits and sensitivities to inputs and external factors
  • Being able to evaluate a situation broadly and to understand the influence of external factors
  • Strong communication skills, being able to accurately and concisely explain and present risk reports, policies, limits and results

Keys to a Strong Risk Management Function:

  • Data
  • Strong computer skills
  • Intellectual curiosity and independence – rock the boat, ask the questions, challenge the establishment, general skepticism
  • Strong communication skills

For further assistance with this or any other issue relating to your student Organization, please do not hesitate to contact the Office of Student Activities and Involvement at (989) 774-3016 or visit UC 101.