Upcoming Engagements
Newscenter
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Genesys To Provide Additional Services to Support Second Fleet
(January 2008) - Norfolk, VA
- Genesys Continues Support of Second Fleet Leadership through Analysis of Second Alignment/Execution Study
(November 2007)
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Genesys Delivers Results of Second Alignment/Execution Study to VADM Chanik, Commander Second Fleet
(October 2007)
Thought Leadership Articles
- Managing Risk—Risking Your Career
- The Value of "Best Practices"
- Sustainable Advantage in Corporate Performance
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Our Visitors :
- Leading Successful Innovation
February 2008 - Managing Risk - Risking your career
December 2007 - The Value of Best Practices
September 2007 - Sustainable Advantage in Corporate Performance - 9 out of 20,000
June 2007 - Improving Producivity and Moral Simultaneously in Complex Organizations
May 2007 - What Do Jet Blue and Sony Have in Common?
March 2007 - Creating Internal Capital
February 2007 - The Leaders Paradox
January 2007 - Aim - Fire - Ready?
January 2006 - You Can Accelerate Execution AND Increase Employee Loyalty
November 2005 - How Many of Your Leaders Can Execute?
October 2005 - Leading Bureaucracies to Execute Better
September 2005
Managing Risk - Risking Your Career
George B. Weathersby
Chairman & CEO, Genesys Solutions, LLC
Charles Prince at Citibank, Stanley O'Neal at Merrill Lynch, and Zoe Cruz at Morgan Stanley join a long list of individuals who have fallen to the spear of risk management. While they have been more than generously rewarded for the management failures that occurred on their watch, no one chooses to impose tens of billions of dollars of losses on his or her firm in return for the tens of millions of dollars of personal gains.
The dilemma of financial institutions is that innovative products are needed to meet increasing investor demands, and these demands will be quickly met in a globally-competitive environment by credible firms in some country, but at the same time there is little or no opportunity to test these new products in a variety of market-stressing situations. Each year literally thousands of new investment products are created by the financial engineers employed by leading investment banks and sold by relationship officers to hedge funds and other financial institutions. Virtually none of these new products have been tested for risk in the real market and presently there is no realistic venue to simulate risk/reward scenarios prior to these investment products hitting the marketplace.
The risk profile of an institution is affected by at least two considerations: (1) the inherent risk in any instrument and its conformity to the risk standards or tolerances adopted by policy by the sponsoring organization; and, (2) the ability of the institution to actually implement its risk standards at the lowest levels of the institution where the risk design and acceptance decisions are made. Once the new instruments are designed and "baked", it is often impossible to accurately determine the resulting risk profile.
From a CEOs perspective, the only aspect of risk control he or she can actually manage is the organizational risk of execution of the institution's risk management guidelines. Perfect execution of the institution's risk guidelines will not reduce the inherent risk of the investment product's design or composition of the product. Effective execution of the institution's risk guidelines will, however, limit the risk to no more than the inherent risk of the product.
In most if not all cases, the lack of effective execution dramatically increases the damage done to the institution when adverse circumstances stress the product design. This was the case for "junk bonds" in the 1980's crises, the LTCB meltdown, the program trading Black Monday crash, and now the subprime lending tsunami. In every case, the most directly controllable aspect of total risk is the execution risk. Also in every case, the nature of execution (operating at the boundaries of the organization, the need for all participating employees to understand multiple dimensions simultaneously, and the actions and behaviors of some individuals unaligned with institutional values) led CEO's to disengage from actively leading risk management and instead to delegating risk management in ways that have proved to be ineffective.
Fortunately, there are proven means by which organizations can lead the execution of their chosen risk management parameters. Firms can look ahead to their ability to implement and sustain their risk management profiles and chart and execute paths which can grow the business units with high ability to execute risk management, as opposed to other units offering high growth with unmanaged risk. The process of execution is just as subject to instrumentation and effective management as any other business process. Genesys has demonstrated in over 300 business units the ability for leaders to lead the execution of their key initiatives, including risk management.
It is possible to manage the risk of execution - without risking your career. I would welcome the opportunity to share with you what we and our clients have learned about risk management.
