Sep 8, 2026 · 20 min · 9 segments
Lots of things seem easy during a Boom. But risk management is not one of those. Dave and Max discuss those difficulties and provide some suggestions for how a CRO can navigate doing their job when…
Dave IngramHost
Max RudolphHost
I thought I knew what to say about ERM in the boom time zone of risk, but it turned out that I didn't.
They are all out there busy growing like mad and believing that risk is either minimal or non-existent.
Executives feel pressured to keep up with the competitors and to grow, grow, grow.
If we look back on the boom that preceded the 2008 financial crisis, risk managers were mostly out there saying how they were helping to grow the business and not put a stop to the excesses.
Well, I can tell you what I think that they should have been doing, but that's not necessarily helpful.
He repeatedly said things that indicated that he believed that the CEO was really the chief risk officer.
And if the CEO doesn't want risk management, then no one will hear a word that the CRO says.
Prior to the financial crisis, at JP Morgan, the CEO Jamie Dimon wanted risk management.
And what happened there was that J.P. Morgan trailed the other banks in return on equity for several years.
More than a year before the market for structured mortgage securities completely froze in the summer of 2007, J.P. Morgan started to unwind their positions in that market because they admitted that they could not reliably model the risks there.
Rather than relying on rating agency analysis of the risks of these securities, they had been doing their own risk analysis, and they limited their leverage unlike many of the other banks.
The result of that high caution was that they did not necessarily need to be bailed out by the Federal Reserve, and they were able to acquire several major banks after the crash at steep discounts.
As a footnote, later losses in other areas showed that they were not all that perfect in that regard anyway.
I thought I knew what to say about ERM in the boom time zone of risk, but it turned out that I didn't.
They are all out there busy growing like mad and believing that risk is either minimal or non-existent.
Executives feel pressured to keep up with the competitors and to grow, grow, grow.
If we look back on the boom that preceded the 2008 financial crisis, risk managers were mostly out there saying how they were helping to grow the business and not put a stop to the excesses.
Well, I can tell you what I think that they should have been doing, but that's not necessarily helpful.
He repeatedly said things that indicated that he believed that the CEO was really the chief risk officer.
And if the CEO doesn't want risk management, then no one will hear a word that the CRO says.
Prior to the financial crisis, at JP Morgan, the CEO Jamie Dimon wanted risk management.
And what happened there was that J.P. Morgan trailed the other banks in return on equity for several years.
More than a year before the market for structured mortgage securities completely froze in the summer of 2007, J.P. Morgan started to unwind their positions in that market because they admitted that they could not reliably model the risks there.
Rather than relying on rating agency analysis of the risks of these securities, they had been doing their own risk analysis, and they limited their leverage unlike many of the other banks.
The result of that high caution was that they did not necessarily need to be bailed out by the Federal Reserve, and they were able to acquire several major banks after the crash at steep discounts.
As a footnote, later losses in other areas showed that they were not all that perfect in that regard anyway.
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