NEW YORK -- Risk management and technology was the focus of a recent conference that included speakers from Xerox Corp., General Motors Corp. and Putnam Investments.
Plan sponsors and money managers spoke about some of the difficulties facing risk managers as they try to balance the human and technological elements. The conference, Total Portfolio Risk Analytics, was sponsored by the Institute for International Research.
Albert Hsu, principal in trust investments for Xerox, Stamford, Conn., outlined the firm's methods for evaluating investment managers. Mr. Hsu said Xerox uses quantitative and qualitative methods in its formal evaluation process.
He explained how Xerox executives had given one of the company's external investment managers some leeway, even though its quantitative risk profile looks "strange," because Xerox has had a good long-term relationship with the firm.
He said value at risk, a statistical attempt to gauge the expected loss of a portfolio, is one gauge Xerox managers may use to track such a manager.
"The key thing we utilize, of course, is to know your managers," he said.
Desmond Mac Intyre, director-risk management for General Motors Investment Management Corp., gave an update on the firm's ongoing risk management efforts.
From a technological perspective, he said the creation of a central "data reservoir" has been a central focus of GMIMCo's risk effort, and GMIMCo executives have made some progress.
Mr. Mac Intyre said that some simple things he has found to be useful in risk management relate to people issues, not necessarily technological ones.
"Risk management is not about generating a VAR number," he said. "Accountability is probably the biggest form of risk control."
Mr. Mac Intyre believes employees should be compensated appropriately for their risk taking. It's good to use "a carrot-and-stick approach," he said, stressing there should be incentives as well as disincentives for employees' efforts.
It's important risk managers be perceived to be on par with the investment community, he said.
