Risk Management is become a key business discipline in any large organization and particularly in Financial Institutions; the 2008 financial crisis largely shed light on this discipline and prompted companies to massively strengthen their Risk and Compliance departments in order to cope with regulatory requirements and prevent another financial crisis. Independently from the Risk area you want to specialize, i.e. Market Risk, Credit Risk, or Operational Risk, a successful Risk Manager will never earn credibility among a well-informed audience though speechifying, but by a clear and precise message sustain by a robust data set, this can be achieved by paying a particular attention to the following:
The above list is clearly not exhaustive, but it enables the Risk Manager to share his output with confidence, and will undeniably facilitate the discussion with internal and external counterparties.
People often are considering a wide spectrum of aspects when looking for a new opportunity (i.e. title, remuneration, work-life balance, etc.), but sometimes are minimizing - or even not considering at all - one of the most important question they should ask themselves: “Will I enjoy working with my future manager? ”.
It can be challenging making an opinion on someone after only a few interviews; but I am convinced that the first impression is important, and that you can learn a lot about the comportment of a person or his global professional or academic knowledge just in a couple of hours.
In my opinion, you can already get a reliable idea of what a person is - or is not - by asking yourselves the two following questions:
Since the perfection is not attainable, do not expect your manager to be perfect, but it is better to avoid starting a new collaboration with the feeling “I have to make do with what I get”; bear in mind that a good manager is one of the most valuable aspect you can expect from your new job.
Whatever the reasons leading you to leave your current job, if you believe that your future manager will not meet your expectations, wait for another opportunity. If many aspects can be renegotiated when you are in your new work environment, do not expect changing how your manager is or how he behaves.
In application of statistics such as modeling, standardization is defined as adjusting different
values to a common scale; normalization of scores – i.e. aligning distributions to a normal distribution – is a typical standardization process. From an
organizational perspective, a traditional Fordist system of mass production can define a standardization process; in other words, uniformizing tasks. I would like to dedicate this post to another
type of standardization process, a phenomenon that can be observed in most large organization, the behavioral standardization.
A wrong corporate culture - as defined by the Deal and Kennedy culture framework - is not optimal to support the organization’s activities; a potential outcome of an inadequate culture can be
inciting employees to adopt smooth attitudes in line with their workplace, avoiding to put themselves at risk by expressing their opinion. Behavioral standardization is often a creeping
phenomenon; there is not necessarily a stated desire coming from the employee or derived from the working environment to modify the employee attitude, but some tricks exist to fight behavioral
standardization and to avoid falling into this trap:
Employees not afraid of expressing their opinions in a constructive way are those that create a tangible added value for any organization. If you have been hired for a role, this is because your employer is convinced that you can perform the job; but you really can distinguish yourself from the competition by bringing new ideas an implementing them, and this can only be performed through your own personality. While remaining respectful and humble, do never try to normalize your traits, this is what really makes you unique.
The differentiation between problem-finding and problem-solving has widely been discussed in the modern literature of Corporate Governance; but past experiences led me to observe that people often are more concerned about providing a solution to a detected “anomaly” than lucidly identifying and understanding the underlying reasons of the problematic. I would like to prove within this post that detecting an anomaly is as decisive - if not more - as finding a remedy.
Let’s start with a basic illustration; as a Risk analyst, you are in charge of managing and supervising a market risk tool assessing the overall volatility of a portfolio of securities. The purpose of the tool is generating an alert when an internal threshold is breached; the model is highly sensitive to the intra-day market volatility. Someday, the bankrupt of a major institution generates whipsaw effects of financial markets, leading the model’s threshold to be breached. You can act as follows:
Amid those possibilities, there is - according to me - one optimal decision, the first one. The last choice can be pushed aside; there are no advantages of managing a model that is purposeless. The second option leads the Risk analyst to transfer its oversight responsibility to another department and to minimize its analysis capabilities, this option is then suboptimal. The third option is an easy way to avoid short-term complication; because the bankrupt of a major Institution is an extreme event, you can expect this phenomenon not to be repetitive. We then keep the solution one, where the analyst reports and evaluates the anomaly. Please find below some thoughts on why I think this option is the best one:
With this post, I want to spot that abnormalities detection requires more than just acting in order that things become normalized. Extreme values should be seen as an opportunity to ask ourselves WHY they occurred, WHAT precisely generated them, and HOW - if needed - could processes/models be improved.