Wall Street’s new risk management: it’s “return of the nerds,” Mark Williams tells Washington Post
Bank execs ready to “cry uncle,” Williams reports
For the Washington Post report “Facing Oversight, Banks Go On Offense,” writer Amit R. Paley interviews risk management expert Mark Williams, Boston University School of Management alumnus (MBA ’93) and current executive-in-residence in the School’s Finance and Economics department:
The chieftains of eight of the nation’s largest banks could receive a tongue-lashing when they testify before a House committee today, but some on Wall Street have moved to preempt the withering criticism by proposing their own solutions to the economic meltdown….Mark T. Williams, an expert on risk management and a former Federal Reserve Bank examiner, said Wall Street has recently begun to elevate the importance of risk management as a good business practice, a trend that is typical once banks sustain enormous losses. He cited the increasing number of chief risk officers in financial firms.
“I call it the return of the nerds,” said Williams, a professor at Boston University’s School of Management and a consultant for Deutsche Bank. “We used to be the nerdy group that was just pushed aside into the back offices to crunch our numbers. Now risk managers are really at the tops of these banks.”
Bank executives hope their adoption of risk management will soften the anger from lawmakers, according to Williams. He said it is similar to a move by JP Morgan in the early 1990s to develop a risk-management approach for the industry before the government did. “They were very proactive in anticipating and heading off additional regulation,” he said. “They realized if they didn’t develop it then regulators would…I think the bank executives are going to cry uncle and finally say: We will accept more regulation,” Williams said.