Confronting regulatory and financial industry change at the world’s largest asset manager: An interview with Ben Golub, Senior Managing Director and Chief Risk Officer of BlackRock, Inc.

Abstract

Ben Golub discusses the risk and business issues of concern to both his position as the chief risk officer of the world’s largest asset management firm and as a thought leader in the risk management profession. Dr Golub generally applauds the regulatory initiatives underway as having made the financial system safer. He, however, parses the popular notion among regulators of asset managers as a class of financial institutions creating systemic risk into real insights into risk exposures that are fictitious and those that are not. He reminds us that risk managing the balance sheet assets of others is quite different from managing a bank’s own on balance sheet assets. In a broad-ranging discussion, Dr Golub ponders the unintended consequences apparent in regulating OTC derivatives: the concentration of risk in CCPs and the use of collateral that can be hard to liquidate when liquidity dries up; the irony of the new risk of regulatory non-compliance; and that the too-big-to-fail issue of size alone depends very much upon the underlying productive technology. He opines that the improvements in risk regulation benefits all as financial institutions have come to accept an interdependent ecosystem. The system is safer now, but the profession has yet to transition to a regime of more explainable and less complex understanding of risk. A progressive step forward is for the profession to learn to speak with a single voice so that issues related to risk management are properly vetted and implementable before being decided upon by regulators. Dr Golub concludes that the profession needs to unify so that its stature with regulators at the global level can be raised.