What it takes to lead in risk management: An interview with Madelyn Antoncic

Madelyn Antoncic discusses risk and business issues from her nearly threedecade career that extends over every modern-day financial crisis while serving at the Fed and many leading financial firms — Goldman, Lehman, Barclay’s, the World Bank and now Principal. She is a recognised thought leader in the risk management profession. Dr Antoncic shares her CRO perspective from time spent at Lehman Brothers during the apex of the financial crisis and her treasurer’s perspective at the World Bank during the EU’s sovereign debt crisis. She reflects on the importance of governance and that risk culture is always set from the tone transmitted from the top of the organisation. Even though Dr Antoncic and her team had been publically recognised at Lehman for building a best-in-class risk system, the risk management team was overruled when riskiness issues encountered commercial interests. She had been quoted in the press before Lehman had entered into its death spiral that ‘the biggest risk is complacency, the biggest risk is no-one wants to listen’. At the World Bank Dr Antoncic oversaw a US$140bn portfolio while developing investment products to meet specific client needs. She and her team developed catastrophic risk structures which helped countries mitigate and transfer such risk. Dr Antoncic emphasises that risk managers, or anyone overseeing the management of assets with a fiduciary responsibility, need to have the courage of their convictions and raise their hands when they see things that are not right as she has done and has been recognised for throughout her career. In her prescription for improvements in risk management, Dr Antoncic views technology as one of the most important tools of the risk profession. With it, risk managers can develop best-in-class models, but with incomplete data or the wrong data, the results are meaningless. But technology is not the only important ingredient. She believes risk managers need to understand the business so they can be a partner with business — be a sounding board not just a reporting function. And most importantly, she believes good governance is the key ingredient to a meaningful risk-aware culture. Dr Antoncic believes that in some institutions there is still too much concentration of power, still not enough checks and balances. She describes one of the big causes of the financial crisis as being inconsistent regulation and enforcement. At that time there were varied financial institutions taking the same risks and engaged in the same businesses yet regulated differently because of how they were incorporated or how they were chartered. This problem — regulatory arbitrage — still exists today in many respects, notwithstanding the good works of the regulatory community.