Investment

These are the guys who are supposed to be internal watchdogs, ensuring that the financial institution does not get carried away too much with its favorite game—Russian roulette. Understandably, once-burned-twice-shy policy applies here. It makes both financial and ethical sense to police those individuals within the firm who have the power to make or lose substantial amounts of money for them.

I find these positions very attractive. It is fun to trade, I should know. But a risk manager, now those are the guys that are there to stay. No burnout effect. The stress level versus the payout factor is outstanding. Plus, the intellectual reward is excellent, for the job goes way beyond buying and selling securities.

Nassim Taleb, however, is not exactly sold on risk managers. He perceives their job as inherently undoable because the reality of traders is not readily observable. Hence, it may be impossible to stop traders from taking on risks in pursuit of profits. And he might be right: just consider the story of Société Générale’s rogue trader, Jerome Kerviel. For most who followed that story, it seemed as if risk managers were only good at covering their respective behinds when the smelly stuff hit the fan.

On the other hand, if there were no watchdogs of any kind, what else does the ordinary Joe Schmo has to look forward to? Hoping that the anarchy of the security markets will go his way once the Pandora’s Box gets opened? Well, good luck with that!