Contributor: Marcus Cree
This blog post originally appeared on TabbFORUM here.
“The best defense is a good offense” may be one of the most oft-repeated sayings in sports, and it is a generally useful outlook in many situations. There are times, though, when the opposite is true. When a Super Bowl is won by a mere 4 points in a game that saw a defensive score in the first quarter and a key interception later in the second half, there are a lot of New Yorkers who would say that a strong, reliable defense is a prerequisite for an effective offense.
Coincidently, not too far from the newly crowned New York Giants’ stadium is Wall Street, where a solid defense may be even more crucial to success.
A solid defense in capital markets means having a risk system that can act as an early warning against external and internal events whose impact could be catastrophic. Most importantly, though, and again like football, a good risk system has to do two things:
1) Reflect the culture and attitude of the firm. Protecting capital and understanding what risks are being taken, and the risk/reward relationship, has never been more important than it is right now.
2) Provide a platform from which the offensive, risk taking part of the firm can operate most effectively.
Both points require the system to be accurate and capable of intraday corrections to ensure that accuracy. They also need the output of the risk calculators to be available throughout the organization.
Now it is interesting to wonder, amongst all the post- Super Bowl talk, how many capital markets risk stakeholders will cast an eye toward the MetLife Stadium, then look back at their risk reports and systems, and contemplate how much stronger they could be with a more robust defense in place.