Risk Management In Name Only

One of the causes mentioned as starting the financial crisis that began in 2008 was the bankruptcy of Lehman Brothers. Lehman had a chief risk officer (CRO), Madelyn Antoncic, who was well qualified for the role. In fact, Antoncic warned Lehman senior management about the risk of the mortgage-backed securities that made up a significant percentage of the company's assets. Instead of listening to the warning and adjusting the company's risks, management took another route to solve the problem: They fired Antoncic.The replacement CRO had no formal risk management training. While Lehman was ultimately undone by taking excessive risk, it also appears that the company was undone by ignoring the person responsible for monitoring the corporate risk profile.