Goldman chief Lloyd Blankfein won a lot of column inches for an
article in the FT this week when he called on the industry to raise the status of the risk manager from obstructive killjoy to guiding light.
"Risk and control functions need to be completely independent from the business units. And clarity as to whom risk and control managers report to is crucial to maintaining that independence. Equally important, risk managers need to have at least equal
stature with their counterparts on the trading desks: if there is a question about the value of a position or a disagreement about a risk limit, the risk manager’s view should always prevail."
Well, excuse me for being a little overhwelmed. Isn't this the self-same advice that's been peddled to the industry for the best part of a decade by every consultant and industry-watcher worth his salt. Talk about locking the stable door after the horse
The risk manager, like the IT chief before him, has too often been seen as an obstacle to the pursuit of profit, rather than an essential mission-critical resource. Those who fail to clamber abroad the gravy-train risk getting left behind.
The point has been rammed home in the curious case of Paul Moore, who was head of risk at HBOS between 2002 and 2005. In written evidence to the Treasury Select Committee, Moore says he was fired by the bank's then CEO Sir James Crosby for repeatedly warning
the bank about its aggressive sales culture and that it was expanding too quickly.
HBOS has denied the claims, but some of the mud is sticking, with parliamentarians calling for a full-scale investigation into the allegations.
Ironically, Sir James Crosby is now deputy chairman of the Financial Services Authority and was last year asked by the Government to advise on measures to improve the mortgage market.
If the case is re-opened, Crosby should immediately step-aside, guilty or not.
As Blankfein says, a re-appraisal of the risk management function at banks is long overdue. But it shouldn't be presided over by the same people who got us into this mess in the first place.