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Killer interview question: “What went wrong?”

Given the events of the past weeks and months, any self-respecting risk professional, trader or banking cleaner can now expect to be assailed by the same nasty question at interview: “What went wrong?”

At least, this is what recruitment firm Robert Walters says in its latest market update. Paula Maidens, a director of financial services at the company, elaborates: “Banks want to know what controls candidates would put in place to prevent writedowns from being repeated. Why weren’t these parcels of products priced properly?”

For anyone bereft of ideas on how to respond, here are a few bite-sized answers from risk professionals with an opinion on the issue:

· Incorrect assumptions: “The assumptions underpinning banks’ risk models turned out to be very far from true,” says Bruce Weber, an IT and markets specialist at London Business School. “The main assumption was that the level of risk for the securities being created was going to remain palatable in future.”

· Plodding risk managers: “The only kind of risk management which works in large complex organisations today is paranoid and nimble,” says Christopher Whalen, managing director of Institutional Risk Analytics, a consultancy that assesses risk in the financial services industry. “This is what Goldman and Blackrock use. Unfortunately, clients are sold something more like plodding and dogmatic.”

· Senior management oblivion: “Three levels below CEO, I can guarantee you that most people don’t understand risk,” says a senior trader at one bank. “This lack of comprehension was coupled with a spectacular bull market in which asset prices were rising and yields were low and the only way to achieve enhanced yield was to increase leverage and invest in riskier products.”

· Misguided confidence in the free market: “Everyone was complicit in creating the problem,” says the trader. “And regulators didn’t pay attention because they believed the free market would simply cleanse itself.”

Comments (8)

Comments
  1. I would have thought `culture’ was the obvious answer. Risk is always second place to chasing profits no?

  2. I would second the Alex … culture is quatify and qualify an organisation

  3. In this short-sighted world, meeting the quota or amount of business generated is No.1. Risk or so is just seen as unwelcomed question. Collapse cannot be avoided.

  4. Risk professionals were routinely abused, underpaid, threatened with job insecurity, treated like second class citizen within their team, etc etc (ditto with regulators hounded by lobbyists and ‘free’ market fundamentalists) — this is the story I have been hearing long before this financial bubble burst. It is laughable that the above ‘piece’ still denies this. Denial equals impediment to solutions.

  5. hey, chill out. that’s just supposed to get you through interview, not achieve world peace

  6. for last few years financial institutions didnt feel a big difference between knowledgeable trading (business practices) and speculation, too much interest based activities where real business activites (output) was not among their preferences, money made money & here we are…

  7. 3 years from now we will do not the same stuff, but at least as crazy as it was again.. and the ones on the train will ride that wave until it crashes on the beach..

    by the way. all things aside.. who really wants to be in risk??

  8. GREED. come on guys its simple, lets be honest.

    A dogmatic ideology of unrestrained capitalism that is quite new to the world ran its obvious path and is now over. Lets admit it, and lets move on. we were greedy as individuals, as companies and as a society and now its over, and a good thing too, i’m going to try and do something constructive with my life now.

    (Quick note to anyone coming into the industry. view your career as a public service or a service to the economy. A noble progfession like it used to be, not a way to obtain obscene wealth by doing nothing constructive)

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