CMCAS Annual Chief Credit Officers Panel 2020

Credit Benchmark was pleased to co-sponsor the CMCAS Annual Chief Credit Officers Panel last week at the Societe Generale offices in NYC.

Credit Benchmark co-founder Mark Faulkner moderated a panel of prominent senior credit leaders including Vincent DiMassimo of Morgan Stanley, Mary Katherine DuBose of Wells Fargo, Alex Golten of Goldman Sachs, and Penny Tsekouras of UBS. The panellists spoke to a sold out audience of over 200 guests and provided their unique perspectives on the state of the current credit environment and key emerging risks. The panel also discussed how the role of the credit risk professional is evolving and critical competencies to stay relevant.

Emerging risks: ESG

Mark opened the panel discussion with a question about ESG risks, referencing Blockrock CEO Larry Fink’s annual letter to CEOs, which highlighted that climate risk is the top issue on his clients’ minds. Alex agreed that climate change is one of the top risks facing us in this decade and that it will change the economic workings of companies. He stressed that focusing on traditional stakeholders like shareholders and regulators isn’t sufficient.

The banking industry is increasingly facing external demands around climate change action from stakeholders ranging from shareholders to activists, according to Vincent, but there is still much to be decided around metrics, data and disclosures.

When an audience member asked about the use of external data to evaluate ESG risk, the panel invoked the classic question of build vs buy, but agreed that, from an efficiency perspective, it will make sense to incorporate external data that is consumable.

As an example of practical action around climate risk, Penny shared that evaluating a country’s ability to withstand climate damage is part of her team’s ratings methodology for sovereigns.

Mary Katherine noted that the conversation about ESG is an opportunity to bring the enterprise together and think about the impact in aggregate across the business.

Where are we in the cycle?

Mark reminded the group that it has been 12 years since the last credit crunch. Markets are bracing. He asked – where are we in the cycle? In response, Vincent reminded the group that 2019 saw outstanding returns across asset classes and that markets have been “brushing off” recent events including increasing turmoil in the Middle East. With upcoming elections in the U.S, all agreed with Vincent that they can’t recall this level of disparity in political outcomes. For risk managers, things will be interesting.

Evolving role of the credit risk professional

Penny advised that in this new world, whether you are in credit risk, market risk, operational risk, or liquidity risk,  putting yourself in a box is dangerous, especially considering the next cycle will look different.

Alex stressed that relationship building is key. He also encouraged early career professionals to go beyond subject matter expertise. He notices people on his team who are forward-looking and solutions-oriented.

Mary Katherine concurred with Alex that investing in partnerships across lines of business is crucial. She advised young professionals to be willing to raise the dissenting view in the room but also be prepared to move forward regardless of outcome.

The best training for leadership is to get out of your comfort zone and get comfortable being uncomfortable, according to Vincent.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.