At its most fundamental level, we at Blackhawk believe that risk management is a corporate culture issue. To manage risks effectively over time, employees must put the firm’s welfare and the preservation of important client relationships ahead of everything else. Risk is risk, and you can’t be perfect at managing it.
Consequently, we believe that the three absolutely indispensable ingredients of our success in managing risk are: Escalation, Accountability and Culture.
1. Escalation means communicating risk concerns to higher levels of management, getting more fingerprints on potential problem risks and challenging the notion that a business group leader ought to make independent decisions on risks that affect the entire firm.
2. Accountability, of course, means acknowledging that people are responsible for what their business groups do, and, equally important, holding senior management responsible for evaluating all aspects of risk, including the quality of the people with whom the firm chooses to do business with.
3. Culture. Our greatest risk protection, however, comes from ascribing as much status, prestige and compensation to those partners engaged in control functions as to those running businesses — and in constantly rotating partners back and forth between risk control and business operations.
In a nutshell, we believe that any responsible firm’s risks, do not result from proprietary trading, but rather from facilitating client objectives. Being an effective M&A advisor, for example, means giving advice that is actionable, which frequently requires the advisory firm to support the client through capital and other balance sheet commitments.
Far from being over, the impact of the financial mess we are still witnessing today, not just in the US but on a global basis as well, is still being felt the world over and we believe it will sooner than later affect not only rules and regulations, but Wall Street leadership as well.
We are glad Wall Street is headed back to an operating model centered on relationships and value creation as this is pretty much our forte in here at Blackhawk.