GARP Risk Podcast

Hear from Daniel Wagner, CEO of Country Risk Solutions, about the complexities of the global geopolitical risk landscape.

In these volatile and uncertain times, identifying, measuring and managing geopolitical risk is a daunting task. Everywhere we turn, geopolitical struggles are grabbing headlines, whether we’re talking about, for example, the Israel-Hamas and Russia-Ukraine wars, U.S.-China strategic relations, or Red Sea hostilities.

These multi-layered events are having a huge impact across the risk management spectrum, affecting everything from market risk to supply-chain risk to credit risk, cyber risk and liquidity risk. Complicating matters further, they are idiosyncratic and very difficult to predict.

Keeping all this in mind, there are certainly still steps that financial risk managers can take to better measure and mitigate geopolitical threats.

Our guest speaker, Daniel Wagner, is the perfect person to shed light on today’s complex geopolitical environment and to peer into the future.

Links From Today’s Discussion:

GARP Benchmarking Initiative (GBI)^®

Speaker’s Bio

Daniel Wagner, founder and CEO, Country Risk Solutions

Daniel has more than three decades of experience assessing cross-border risk. He is an authority on political risk insurance and analysis and has worked for some of the world’s most respected and best-known companies, including AIG, GE, the African Development Bank, the Asian Development Bank, and the World Bank Group. Until the end of 2023, he was Adaptation Finance Lead and Technical Advisor on Private Capital Mobilization for COP28 in Abu Dhabi. Prior to that, he was Senior Investment Officer for Guarantees and Syndications at the Asian Infrastructure Investment Bank in Beijing and Abu Dhabi.

Daniel has published 10 books – Decision-Making in the Polycrisis Era, The Chinese Epiphany, The Chinese Vortex, The America-China Divide, China Vision, AI Supremacy, Virtual Terror, Global Risk Agility and Decision-Making, Managing Country Risk, and Political Risk Insurance Guide – as well as more than 700 articles on current affairs and risk management. He is a regular contributor to such publications as the South China Morning Post, Sunday Guardian, Diplomatic Courier and Fair Observer, among many others. Please see www.countryrisksolutions.com for a full listing of his publications and media interviews.

In this podcast, Julie Muckleroy, Global Banking Strategist from SAS, and Abraham Izquierdo, Managing Director of Trading and Treasury Risks at Grupo Financiero Banorte, explore the top risk management trends for 2024.

With the start of 2024, persistent high interest rates and inflation remain key concerns. Adding to these challenges are potential conflict escalation in the Middle East, threats to global shipping lanes, and historically low water levels in Panama, among others.

The fallout from the failure of Silicon Valley Bank and the rapid growth of Generative AI are also being analyzed, impacting both smaller financial institutions' balance sheets in the U.S. and the wider financial landscape.

Speakers’ Bios:

Abraham M Izquierdo, FRM: Managing Director of Trading & Treasury Risks at Grupo Financiero Banorte, overseeing balance sheet oversight, policy compliance, hedging strategies, and interest rate risk management. He also manages liquidity risk framework and the Basel III directive, as well as capital management and surveillance for Grupo Financiero Banorte.

Julie Muckleroy: Global Banking Strategist in SAS’ Global Industry Marketing organization. With a background in marketing leadership roles at SaaS organizations and large US banks like Bank of America and Wells Fargo, Julie brings extensive knowledge and expertise in global banking trends and marketing strategies. She evaluates the future state of banking as a strategist at SAS.

Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a seriesof podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals atwww.sas.com/risk

Hear from Moody’s Analytics’ Cris deRitis about geopolitical risk, cybersecurity, political unease, supply-chain threats, and other key issues that will impact risk managers this year.

2023 was a hectic and extremely challenging year for risk managers. The U.S. regional banking crisis grabbed headlines, with failures being blamed on everything from poor risk culture and ineffective risk modeling to interest-rate volatility – and even to the speed at which news travels in the social media era.

Geopolitical risk and supply-chain risk also contributed to an environment of volatility and uncertainty, fueled by the start of a violent conflict between Israel and Hamas, the ongoing Russia-Ukraine war, and attacks on commercial shipping vessels in the Red Sea. Technology, moreover, has evolved, with cyberattacks becoming more sophisticated and more prevalent, and with new innovations – like generative AI – bringing both risks and opportunities.

That leads us to today’s topic: namely, how will the remainder of 2024 shake out? What changes may be on the horizon, and which trends will have the greatest impact on the financial risk management landscape?

Cris deRitis, the deputy chief economist at Moody’s Analytics, sheds some light on what lies ahead for risk managers.

Links From Today’s Discussion:

GBI® survey on energy security risk | Global Association of Risk Professionals (GARP) posted on the topic | LinkedIn

https://www.garp.org/garp-benchmarking-initiative

https://www.garp.org/risk-intelligence/modeling-risk/all

SPEAKER BIO:

Cristian deRitisis the Deputy Chief Economist at Moody's Analytics. As the head of model research and development, he specializes in the analysis of current and future economic conditions, consumer credit markets and housing. Before joining Moody's Analytics, he worked for Fannie Mae. In addition to his published research, Cristian is named on two U.S. patents for credit modeling techniques. Cristian is also a co-host on the popularInside Economics Podcast. He can be reached at[email protected].

Hear veteran risk manager, advisor and professor Clifford Rossi’s viewpoints on trends, threats and opportunities in the commercial and residential real estate markets.

The past couple of years have been an extremely challenging time for risk practitioners charged with measuring and managing real estate risk. In both commercial real estate and residential real estate, concerns have been raised globally about interest rates, inflation and economic uncertainty. Indeed, in a recent Federal Reserve survey on salient risks – part of the Fed’s October Financial Stability Report – roughly 75 percent of respondents cited the potential for “large losses on CRE and residential real estate.”

CRE, more specifically, has been plagued by escalating vacancy rates for office buildings, thanks in part to the remote work trend that started during the pandemic and has since taken off. Residential real estate, meanwhile, has dealt with worries about housing affordability.

As a former CRO at multiple banks and as an ex-senior risk manager at Fannie Mae and Freddi Mac, Cliff Rossi, our honored guest today, knows all about the CRE and residential real estate risks facing financial institutions today. Cliff, the current Director of the Smith Enterprise Risk Consortium at the University of Maryland (UMD), speaks with GARP editorial director Robert Sales about global real estate concerns and challenges, and offers advice on how firms can more effectively manage their exposures.

SPEAKER’S BIO:

Clifford Rossi (PhD) is the Director of the Smith Enterprise Risk Consortium at the University of Maryland (UMD) and a Professor-of-the-Practice and Executive-in-Residence at UMD’s Robert H. Smith School of Business. He is also the author of GARP’s monthly “CRO Outlook” column.

Prior to entering academia, Rossi had nearly 25 years of experience in banking and government, having held senior executive roles in risk management at several of the largest financial services companies. His most recent position was Managing Director and Chief Risk Officer for Citigroup’s Consumer Lending Group, where he was responsible for overseeing the risk of a $300+B global portfolio of mortgage, home equity, student loans and auto loans with 700 employees under his direction. While there he was intimately involved in Citi’s TARP and stress test activities. He also served as Chief Credit Officer at Washington Mutual (WaMu) and as Managing Director and Chief Risk Officer at Countrywide Bank.

Previous to these assignments, Rossi held senior risk management positions at Freddie Mac and Fannie Mae. He started his career during the thrift crisis at the U.S. Treasury’s Office of Domestic Finance and later at the Office of Thrift Supervision working on key policy issues affecting depositories. Rossi was also an adjunct professor in the Finance Department at the Robert H. Smith School of Business for eight years and has numerous academic and nonacademic articles on banking industry topics. Rossi is frequently quoted on financial policy issues in major newspapers and has appeared on such programs as C-SPAN’s Washington Journal and CNN’s Situation Room. His book for risk practitioners and graduate students, A Risk Professional's Survival Guide, was published in 2014 by John Wiley & Sons, Inc. His research interests are in financial and nonfinancial risk management, risk governance and analytics and climate risk.

Hear from Wall Street veteran and author Aaron Brown about the impact of fast-evolving technology on risk management.

Financial institutions are now using everything from machine-learning modeling and generative AI to blockchain and public-key cryptography for risk monitoring, measurement and mitigation. What’s more, we can see on the horizon the development of other tools – like central bank digital currencies – that could further alter the landscape.

However, each of these technologies present their own set of challenges, and it’s important for risk managers to understand both their advantages and potential drawbacks.

Aaron Brown, a renowned author and former CRO of AQR Capital Management, has had a front-row seat to the evolution of technology in financial risk management.

He joins GARP editorial director Robert Sales to discuss the pros and cons of technological innovations, and to explore what’s on the horizon, drawing on his previous work as a trader, portfolio manager, head of mortgage securities and risk manager for several global financial institutions.

SPEAKER'S BIO

Aaron Brown teaches finance and mathematics as an adjunct at NYU and writes Risk Intelligence’s monthly “Tech Perspectives” column. He is a distinguished risk manager who has held a variety of high-level positions on Wall Street, dating back to the early 1980s. Most recently, he served for 10 years as chief risk officer of the large hedge fund AQR Capital Management. His books on risk management include The Poker Face of Wall Street, Red-Blooded Risk, Financial Risk Management for Dummies and A World of Chance. In 2011, he was named GARP’s Risk Manager of the Year.

In this podcast Zeynep Salman, Head of Risk Decisioning, EMEA at SAS, will explore the top trends and market practices for financial institutions as they adapt to digitizing credit decisioning.

We will dive deeply into key success factors for establishing innovative credit customer journeys while achieving successful business outcomes that keep the lending business profitable. We will also discuss how a country’sregulatory requirements and market dynamics can affect the transformation journey.

Link from today’s discussion can be found here:

The Value of Credit Risk Transformations and the Role of AI

Speaker’s Bio

Zeynep Salman is a credit risk professional with experience managing originations, customer management, and collections teams for consumer and small business portfolios. She joined SAS in 2022 and is currently leading risk decisioning advisory activities across EMEA. Zeynep is passionate about driving automation, seamless customer experiences, convergence of credit and fraud evaluations across customer lifecycle, AI-driven customer engagements, and working with clients to support near and long-term strategic roadmaps to drive value.

Before joining SAS, Zeynep held key roles at financial institutions including Citibank, HSBC, Toyota Finance, and UniCredit, as well as software vendors such as FICO.

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Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a series of podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals atwww.sas.com/risk

Is it possible for financial institutions to offer on-demand, superior customer experiences while making risk decisions in near real-time in an increasingly digital and interconnected world? That is the question we’ll explore in this podcast featuring Terisa Roberts, Global Solution Lead, Risk Modeling and Decisioning at SAS, and Bruce Erb, Director – Credit Risk Consulting, KPMG.

Traditional financial institutions are encountering additional hurdles, including fierce competition from agile newcomers, new regulatory demands for operational resiliency, and increased technology risk. In an age of digital lending driven by artificial intelligence, what are modern financial institutions doing differently to remain agile and profitable while keeping costs in check?

We’ll delve into several strategies that financial institutions are adopting for risk-based decision-making to bolster their resilience in times of uncertainty.

Speakers

Terisa Roberts, Global Solution Lead, Risk Modeling and Decisioning, SAS

Terisa Roberts is a risk management professional with 15 years of experience primarily in the financial services sector. She is currently a Director and Global Solution lead for Risk Modeling and Decisioning at SAS.

Terisa has an extensive background in risk modeling for retail and commercial portfolios including regulatory capital stress testing and IFRS9/CECL. She advises banks, other financial services providers, and regulators concerning innovations in Risk Modeling and Decisioning including artificial intelligence and machine learning.

Teresa holds a Ph.D. in Operations Research and Informatics and lives in Sydney, Australia.

Bruce Erb, Director – Credit Risk Consulting, KPMG

Bruce Erb has been a risk professional for over 23 years in both industry and consulting.At KPMG, he has supported financial services clients in a variety of risk programs and initiatives with a current focus on transformation of credit and risk governance operating and execution models leveraging alternative approaches including automation, advanced analytics, and cognitive technologies.

Bruce was the product owner and co-inventor of an audit investigation tool that leveraged digitization, automation, and cognitive components to augment the way risk professionals evaluate and score a commercial loan. He was a loan officer for more than nine years before joining KPMG.

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Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a series of podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals atwww.sas.com/risk

Hear veteran risk manager, advisor and professor Clifford Rossi’s perspective on recent turmoil in the banking system, on where risk management fell short, and the profession’s readiness for future challenges.

The collapse of Silicon Valley Bank (SVB) and subsequent events inevitably invited comparisons with past crises. It was widely assumed that the damages of 2023 would be more contained than those of the Great Financial Crisis of 2008. But they could similarly leave a long tail, with economic and regulatory repercussions well into the future.

A clear parallel between 2008 and 2023 is the spotlight placed on risk management. In the intervening years, the risk function in banking and financial services grew in prestige and responsibility – and its failings were documented as having played a role in SVB’s demise.

Drawing from regulatory experience early in his career, to senior risk and credit positions at major financial institutions, to his current professorship at the University of Maryland, Cliff Rossi has lived through multiple crises while observing the effectiveness and evolution of risk management. GARP Risk Intelligence’s CRO Outlook columnist, Rossi has been especially critical of boards of directors’ risk governance, one of many timely subjects covered in his podcast conversation with GARP contributing editor Jeff Kutler.

SPEAKER'S BIO

Clifford Rossi (PhD) is an Executive-in-Residence and Professor of the Practice at the Robert H. Smith School of Business, University of Maryland. He is also the author of GARP’s monthly “CRO Outlook” column.

Prior to entering academia, Rossi had nearly 25 years of experience in banking and government, having held senior executive roles in risk management at several of the largest financial services companies. His most recent position was Managing Director and Chief Risk Officer for Citigroup’s Consumer Lending Group, where he was responsible for overseeing the risk of a $300+B global portfolio of mortgage, home equity, student loans and auto loans with 700 employees under his direction. While there he was intimately involved in Citi’s TARP and stress test activities. He also served as Chief Credit Officer at Washington Mutual (WaMu) and as Managing Director and Chief Risk Officer at Countrywide Bank.

Previous to these assignments, Rossi held senior risk management positions at Freddie Mac and Fannie Mae. He started his career during the thrift crisis at the U.S. Treasury’s Office of Domestic Finance and later at the Office of Thrift Supervision working on key policy issues affecting depositories. Rossi was also an adjunct professor in the Finance Department at the Robert H. Smith School of Business for eight years and has numerous academic and nonacademic articles on banking industry topics. Rossi is frequently quoted on financial policy issues in major newspapers and has appeared on such programs as C-SPAN’s Washington Journal and CNN’s Situation Room. His book for risk practitioners and graduate students, A Risk Professional's Survival Guide, was published in 2014 by John Wiley & Sons, Inc. His research interests are in financial and nonfinancial risk management, risk governance and analytics and climate risk.

Hear from Dr. Donald van Deventer, Managing Director--Risk Research and Quantitative Solutions at SAS, and Professor Robert Jarrow of Cornell University’s SC Johnson College of Business as we continue our discussion of the current banking climate as it relates to integrated balance sheet management — and specifically asset and liability management (ALM).

This special two-part podcast series will explore conditions under which a bank is at risk of a “run” by looking internally at their assets and liabilities. We will also consider how to model simulations to project when assets will become negative relative to liabilities and determine how to ensure resiliency within financial institutions.

Part 1 of this series will tackle the following topics:

• Introduction to deposit models for FDIC insurance
• How to handle hedging and mismatched balance sheets
• Determining what analytical methods are essential to "doing it right"
•  An introduction to non-maturity demand deposit runoff that will be a key component for part 2 of this series

Speaker Bios

Dr. Donald van Deventer, Managing Director--Risk Research and Quantitative Solutions @ SAS

He joined the Risk Research and Quantitative Solutions group at SAS Institute, Inc. in June 2022 through SAS’ acquisition of his previous firm, the Kamakura Corporation. He founded Kamakura in 1990 and served as Chairman and Chief Executive Officer until the acquisition.
Dr. van Deventer's emphasis at SAS Institute, Inc. is enterprise-wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading-edge financial theory to solve critical financial risk management challenges.

Robert Jarrow is the Ronald P. and Susan E. Lynch Professor of Investment Management at Cornell University’s SC Johnson College of Business. He is a co-creator of the Heath-Jarrow-Morton (HJM) model, the reduced form credit risk model, and the forward price martingale measure, the standards for pricing and hedging derivatives at major financial institutions. Jarrow is a pioneer of arbitrage-pricing theory and has written seven textbooks and over 225 pieces for academic journals.

Jarrow is on the advisory board of numerous academic journals including the Frontiers of Mathematical Finance. His research has won many awards, and he was named IAFE Financial Engineer of the Year in 1997. Jarrow is in the Fixed Income Analysts Society Hall of Fame, Risk Magazine’s 50-member Hall of Fame, is listed in the Who’s Who of Economics, and received Risk Magazine’s Lifetime Achievement Award in 2009. He is currently an IAFE senior fellow and serves on various industry advisory boards.

Over the years, GARP and SAS have worked together to bring risk practitioners unique insights on a variety of topics related to risk management. This time, we are partnering on a brand-new podcast, Risk and Resiliency to take a closer look at ways to face the challenges ahead, to be more agile, vigilant, and quickly adapt to shifting market conditions. 

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals at www.sas.com/risk

Welcome back for the conclusion of this special two-part podcast series featuring Dr. Donald van Deventer, Managing Director--Risk Research and Quantitative Solutions at SAS, and Professor Robert Jarrow of Cornell University’s SC Johnson College of Business. We continue the discussion of the current banking climate as it relates to integrated balance sheet management — and specifically asset and liability management (ALM).

Part two of this series will tackle the following topics:

• A further exploration of non-maturity demand deposit runoff
• Deeper understanding of the estimated default probabilities for a bank that funds investments in Treasury securities with deposits
• Examples of how those default probabilities vary by maturity and the bank's initial capital position
• Tangible actions for aligning your balance sheet and optimizing your risk profile

Speaker Bios

Dr. Donald van Deventer, Managing Director--Risk Research and Quantitative Solutions @ SAS

He joined the Risk Research and Quantitative Solutions group at SAS Institute, Inc. in June 2022 through SAS’ acquisition of his previous firm, the Kamakura Corporation. He founded Kamakura in 1990 and served as Chairman and Chief Executive Officer until the acquisition.
Dr. van Deventer's emphasis at SAS Institute, Inc. is enterprise-wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading-edge financial theory to solve critical financial risk management challenges.

Robert Jarrow is the Ronald P. and Susan E. Lynch Professor of Investment Management at Cornell University’s SC Johnson College of Business. He is a co-creator of the Heath-Jarrow-Morton (HJM) model, the reduced form credit risk model, and the forward price martingale measure, the standards for pricing and hedging derivatives at major financial institutions. Jarrow is a pioneer of arbitrage-pricing theory and has written seven textbooks and over 225 pieces for academic journals.

Jarrow is on the advisory board of numerous academic journals including the Frontiers of Mathematical Finance. His research has won many awards, and he was named IAFE Financial Engineer of the Year in 1997. Jarrow is in the Fixed Income Analysts Society Hall of Fame, Risk Magazine’s 50-member Hall of Fame, is listed in the Who’s Who of Economics, and received Risk Magazine’s Lifetime Achievement Award in 2009. He is currently an IAFE senior fellow and serves on various industry advisory boards.

Over the years, GARP and SAS have worked together to bring risk practitioners unique insights on a variety of topics related to risk management. This time, we are partnering on a brand-new podcast, Risk and Resiliency to take a closer look at ways to face the challenges ahead, to be more agile, vigilant, and quickly adapt to shifting market conditions. 

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals at www.sas.com/risk