Introduction
Maureen J. Miskovic believes that in the post-crash period risk managers of banks and financial institutions are going to step out of the back office and into front-line roles. Miskovic has been Executive Vice-President and Chief Risk Officer at Boston-based State Street since April 2008. In this capacity, she oversees a global team of more than 250 multidisciplinary enterprise risk professionals.
Miskovic, born in the United Kingdom, is also a member of State Street’s operating group. She was previously Senior Adviser at Eurasia Group, a global political risk advisery and consulting firm based in New York. She has also worked at Lehman Brothers in New York, and Morgan Stanley, SG Warburg, and Morgan Grenfell in London.
Miskovic has published a book titled Futures and Options—A Handbook for Institutional Investors and serves as an honorary member of the leadership council of the Betty Ford Foundation. She holds a Bachelor of Arts degree in Russian and German from King’s College, London University.
The Financial Crisis
The crisis that gripped the global economy over the last two years has given rise to many thousands of words and countless hours of discussions over perceived failures in risk management. It is tempting to point an accusatory finger at the use and misuse of risk models, but the truth is more complex and lies more appropriately in the failure of an entire risk culture.
The sub-prime crisis, which was at the heart of the crisis, is rightly remembered as the child of two greedy parents: investors seeking higher yields and loan originators who led a race to sign up ever-less-creditworthy borrowers and then pass on the loans, thereby retaining no interest in those loans. But this explanation is too simplistic.
The behavior of these greedy parents was facilitated by many, including politicians who advocated a policy of home ownership; credit rating agencies that failed to adjust their rating models even in light of default experience; banks that were incented to make loans appear as profitable as those issued by their rivals; boards of directors that should have asked more searching questions about the risk of the portfolios; banking analysts and a central bank that kept the funds flowing cheaply; and lastly, regulators who certainly had access to the relevant information needed to get a consolidated view of systemic risk. All of these constituencies bear some part of the blame for the worst recession since the 1930s.
Indeed, 2008-2009 may be regarded by history as marking a revolution in the financial services industry. We witnessed unprecedented government intervention and assistance to banks and other financial institutions particularly in Europe and the United States, as well as bank failures, consolidation, skyrocketing unemployment and increased defaults on corporate debt. These factors will almost certainly lead to further reorganization in the financial services industry.
As the watershed event of the crisis, the Lehman Brothers bankruptcy represents the counter-intuitive phenomenon of “too big to fail, yet too big to succeed.”
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