Job at time of interview: Head of Investment Risk and Performance, Vanguard
I'm lucky to be doing what I do for Vanguard. The tone from the top is clear and unambiguous: risk management is a key focus and it's part of everyone's job every day. As a risk manager, this makes my job a lot easier because I don't spend time justifying the value add of risk management. Instead, my team and I focus on managing investment risk for Vanguard's $1.5 trillion of internally managed assets. That's an awesome responsibility, and one that we take very seriously. It all starts with having a talented team. Our goal is to make risk and return transparent through performance attribution and the calculation of risk being taken in each portfolio every day. One thing that allows us to be as effective as we are is the way in which we're organized. My team is integrated within the investment management organization and collocated with the portfolio management teams. This allows us to seamlessly partner with them to discuss potential trading strategies before they are implemented, provide an independent assessment of risks to ensure no unintended bets are being made, and objectively measure the effectiveness of the decisions that were made so we can learn from them. If we were not involved in this way, we'd be managing risk through a rearview mirror, which is not the best way to protect shareholder investments. In the end, all of the reporting, research, and analysis we do is about protecting and enhancing Vanguard's leadership position as an investment manager.
I didn't have an investment background when I first moved into this role several years ago, but it played to some of my core strengths - I'm a very analytical and detail-oriented person. In addition to strong leadership skills, those are two important qualities for a risk manager. But it's one thing to talk about strength-based leadership, and another to be responsible for risk management when investor dollars are at stake. The FRM is a highly respected designation in the industry and is a great outward reflection of the knowledge I bring, along with my core strengths, to important investment risk related decisions. Also, I was coming into a team of seasoned risk professionals. I wanted to signal to them that I was committed to risk management. If I were looking for them to invest in their continued education and learning, I wanted to lead by example. I didn't feel it was appropriate for me to ask them to get a designation, or to invest in themselves, if I wasn't willing to do it myself.
One aspect of the FRM that is particularly relevant is learning about the case studies detailing how bad outcomes happened over time. We really can learn a lot from history, and that can help us anticipate tomorrow's problems. The FRM is not the be-all and end-all when you're looking at job applicants, but it definitely catches my eye when I'm looking at resumes and trying to decide who to interview. It gives you a certain assurance that someone is dedicated to the profession and has the intellect and the analytical ability to be a risk manager. But I wouldn't necessarily give a job to someone just out of college because they had passed the FRM exams. Experience is incredibly important as well, so that two years of experience is an important criterion for the designation.
Like engineering, investment management is a highly quantitative field. And like many other industry designations, the FRM is about much more than just learning something -- it's about figuring out how to apply the analytical side to connect the dots. As a risk manager, you're drawing conclusions from data everyday and figuring out what that data is showing you to help influence decision making in the investment process.
It's essential. Risks are always changing because the market is dynamic. However, as important as continuing education is, it's also important to develop really great partnerships and relationships with the people who are doing the trading. It's one thing to know theoretically what's available; it's another to know what tools, investment products, or trading strategies are actually being used. We need to stay abreast of emerging risks and trends. However, without really understanding how they are being used and how they are being applied, it's only theoretical. You really need to have great relationships.