GARP Risk Podcast

Hear from Bo Xu, a Principal at Boston Consulting Group (BCG) and a member of GARP’s Risk and AI Advisory Committee, about GenAI use cases and challenges, as well as its impact on modeling, governance, regulation and risk careers.

Even though generative AI is in its early days, its already having a big effect in financial risk management. As a powerful, interactive technology that can understand natural language, quickly search through reams of data and provide human-style answer to questions, GenAI is being used today for everything from data processing to risk monitoring and measurement to quantitative risk modeling.

At the same time, financial institutions must decide how to properly govern GenAI, particularly as critics have expressed concerns about data leakage, intellectual property protection and third-party risk. What’s more, there are questions about the impact GenAI could have on risk jobs and about how regulators are going to respond to this innovative technology.

Relevant Links:

GARP Benchmarking Initiative

Risk Intelligence: Technology Section

Speaker’s Bio

Bo Xu serves as a Principal at Boston Consulting Group (BCG), where he is a core member of the global GenAI expert team. His professional journey at BCG began in 2019, following a four-year tenure at KPMG in the risk consulting practice, concentrating on CCAR/DFAST model development and validation work.

In his role at BCG, Xu leads a multi-disciplinary team focused on AI and GenAI programs. His responsibilities encompass strategy development, AI/GenAI implementation, and change management. He also has expertise in credit risk analysis, model risk management, and data governance from his earlier career.

Hear from Terisa Roberts, Global Head of Risk Modeling and Decisioning at SAS and Sarah Murphy, Principal Director of Accenture Data and AI, as we explore real-time customer decision making and what it means for portfolio monitoring.

Thanks to the internet and artificial intelligence, consumers today can make financial decisions through multiple channels, resulting in a new level of competitive pressure for the sector. Financial services firms must make decisions that are not only fast and reliable, but also automated. Real-time customer decisioning plays a pivotal role in achieving these goals throughout the credit value chain, from the point of onboarding (including KYC, credit risk and fraud assessments and marketing) and beyond.

Today’s episode will focus on:

What are the global trends driving change in customer decisioning in financial services?

What problems/challenges are there with conventional approaches? What are the benefits of modernizing your credit decisioning infrastructure?

How are forward-thinking organizations deriving concrete business value from their decisioning modernization projects?

Links from today’s discussion:

SAS and Accenture Risk Model Decisioning

Risk-Based Decisioning in an Age of Uncertainty Part 1

Risk-Based Decisioning in an Age of Uncertainty Part 2

Speakers Bios:

Terisa Roberts Global Head of Risk Modeling and Decisioning, SAS

Terisa Roberts is a risk management professional with 20 years of experience primarily in the financial services sector. She is currently a Director and Global Lead for Risk Modeling and Decisioning at SAS.

Terisa has an extensive background in risk modeling for retail and commercial portfolios including regulatory capital stress testing and IFRS9/CECL. She advises banks, other financial services providers and regulators concerning innovations in Risk Modeling and Decisioning including artificial intelligence and machine learning.

Teresa holds a Ph.D. in Operations Research and Informatics and lives in Sydney Australia

Sarah Murphy, Principal Director, Accenture Data and AI

As a Principal Director at Accenture, Sarah leads the growth of Intelligent Decisioning within the Applied Intelligence practice, leveraging 25+ years of risk management and operational experience in financial services and global consulting. ​ 

Sarah has a proven track record of solving complex risk issues across the credit customer lifecycle, applying predictive analytics and decision management to transform business culture, minimize exposure, increase profitability, and create risk management centers of excellence. She also has a strong executive presence and excellent communication skills, enabling her to partner with clients and stakeholders at all levels and deliver value-added solutions. ​

Passionate about staying at the forefront of the latest trends and technologies in intelligent decisioning, her mission is to help organizations harness the power of data and analytics to optimize their decision making, enhance their customer experience, and achieve their strategic goals. 

Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a series of podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

About SAS

SAS is a global leader in data and AI. We help organizations transform data into trusted decisions faster by providing knowledge in the moments that matter. No matter how you prioritize risk, SAS has proven solutions and best practices to help organizations establish a risk-aware culture, optimize capital and liquidity, and meet regulatory demands.

SAS® provides on-demand, high-performance risk analytics to ensure greater efficiency and transparency. Strike the right balance between short- and long-term strategies. And confidently address changing regulations and manage compliance. 

Discover why 90% of Fortune 100 companies choose SAS to solve their toughest challenges at sas.com/riskmanagement.

Hear from Cristian deRitis, deputy chief economist at Moody’s analytics, about the evolution of stress testing, current trends, and the biggest challenges facing banks and regulators.

Regulatory stress tests play a vital role in ensuring that large banks hold enough capital to withstand extreme recessions, while internal stress tests at banks are used for everything from capital and liquidity planning to risk monitoring, risk identification and operational resilience.

The 2023 failures of a group of mid-sized U.S. banks, however, have led some critics to question whether the Federal Reserve’s annual stress test is broad enough, comprehensive enough and sufficiently proactive – particularly with respect to emerging threats and rare tail risks. Globally, meanwhile, we’ve seen stress testing expand beyond capital and liquidity and into areas like climate risk, which has created a whole new set of hurdles for regulators and banks.

In the future, to address perceived flaws, it’s feasible that we could see a broadening of regulatory stress tests and changes to central banks’ approaches to scenarios. Banks, meanwhile, may consider increasing the frequency of their internal tests and expanding their use of AI models to rapidly factor in a wider array of scenarios.

Relevant Links:

GARP Benchmarking Initiative

Modeling Risk (Risk Intelligence column by Cristian deRitis)

Speaker’s Bio

Cristian deRitis is Managing Director and Deputy Chief Economist at Moody's Analytics. As the head of econometric model research and development, he specializes in the analysis of current and future economic conditions, scenario design, consumer credit markets and housing. In addition to his published research, Cristian is a co-host on the popular Inside Economics Podcast. He can be reached at [email protected].

Nirav Shah, a founding partner at Versor Investments, speaks with GARP editorial director Robert Sales about the pros and cons of artificial intelligence and machine learning for buy-side institutions.

Though significant concerns remain about the bias, fairness an explainability of AI and ML, these innovative technologies have made great inroads in financial services. Banks, for example, now use AI and ML for everything from anti-money laundering to fraud detection to risk modeling and analysis, while asset management firms employ these tools for portfolio optimization and risk mitigation.

Nirav Shah discusses the role ML plays in risk reduction and alpha generation at buy-side institutions, and offers his thoughts on, among other topics, data governance and data management challenges, the growth of generative AI, the importance of regulation, and potential future applications of this technology.

Speaker’s Bio

Nirav Shah is a founding partner at Versor Investments, where he has built innovative, scalable systems for using alternative data and AI/ML techniques. These tools are used in the firm's investment strategies, particularly within the futures and equities markets. He has also worked on various parts of the investment process at Versor, ranging from research to portfolio construction and trading.

He has nearly two decades of experience in quantitative and systematic investment management. Prior to Versor Investments, he founded a consulting firm focused on quantitative research. Earlier, he served as Vice President at Investcorp in New York, where he focused on asset allocation and quantitative research. His career also includes a role as a Quantitative Researcher at Phoenix Global Capital Management, a CTA based in Chicago.

Hear from Daniel Wagner, CEO of Country Risk Solutions, about the complexities of the global geopolitical risk landscape.

In these volatile and uncertain times, identifying, measuring and managing geopolitical risk is a daunting task. Everywhere we turn, geopolitical struggles are grabbing headlines, whether we’re talking about, for example, the Israel-Hamas and Russia-Ukraine wars, U.S.-China strategic relations, or Red Sea hostilities.

These multi-layered events are having a huge impact across the risk management spectrum, affecting everything from market risk to supply-chain risk to credit risk, cyber risk and liquidity risk. Complicating matters further, they are idiosyncratic and very difficult to predict.

Keeping all this in mind, there are certainly still steps that financial risk managers can take to better measure and mitigate geopolitical threats.

Our guest speaker, Daniel Wagner, is the perfect person to shed light on today’s complex geopolitical environment and to peer into the future. 

Links From Today’s Discussion:

GARP Risk Snapshot April 2024: Geopolitical Risk

GARP Benchmarking Initiative (GBI)®

Speaker’s Bio

Daniel Wagner, founder and CEO, Country Risk Solutions

Daniel has more than three decades of experience assessing cross-border risk. He is an authority on political risk insurance and analysis and has worked for some of the world’s most respected and best-known companies, including AIG, GE, the African Development Bank, the Asian Development Bank, and the World Bank Group. Until the end of 2023, he was Adaptation Finance Lead and Technical Advisor on Private Capital Mobilization for COP28 in Abu Dhabi. Prior to that, he was Senior Investment Officer for Guarantees and Syndications at the Asian Infrastructure Investment Bank in Beijing and Abu Dhabi.

Daniel has published 10 books – Decision-Making in the Polycrisis Era, The Chinese Epiphany, The Chinese Vortex, The America-China Divide, China Vision, AI Supremacy, Virtual Terror, Global Risk Agility and Decision-Making, Managing Country Risk, and Political Risk Insurance Guide – as well as more than 700 articles on current affairs and risk management. He is a regular contributor to such publications as the South China Morning Post, Sunday Guardian, Diplomatic Courier and Fair Observer, among many others. Please see www.countryrisksolutions.com for a full listing of his publications and media interviews.

 In this podcast, Julie Muckleroy, Global Banking Strategist from SAS, and Abraham Izquierdo, Managing Director of Trading and Treasury Risks at Grupo Financiero Banorte, explore the top risk management trends for 2024.

With the start of 2024, persistent high interest rates and inflation remain key concerns. Adding to these challenges are potential conflict escalation in the Middle East, threats to global shipping lanes, and historically low water levels in Panama, among others.

The fallout from the failure of Silicon Valley Bank and the rapid growth of Generative AI are also being analyzed, impacting both smaller financial institutions' balance sheets in the U.S. and the wider financial landscape.

Speakers’ Bios:

Abraham M Izquierdo, FRM: Managing Director of Trading & Treasury Risks at Grupo Financiero Banorte, overseeing balance sheet oversight, policy compliance, hedging strategies, and interest rate risk management. He also manages liquidity risk framework and the Basel III directive, as well as capital management and surveillance for Grupo Financiero Banorte.

Julie Muckleroy: Global Banking Strategist in SAS’ Global Industry Marketing organization. With a background in marketing leadership roles at SaaS organizations and large US banks like Bank of America and Wells Fargo, Julie brings extensive knowledge and expertise in global banking trends and marketing strategies. She evaluates the future state of banking as a strategist at SAS.

Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a series of podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

Learn more of the trends shaping the banking sector in 2024: The Year Ahead: Bank Trends for 2024

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals at www.sas.com/risk

Hear from Moody’s Analytics’ Cris deRitis about geopolitical risk, cybersecurity, political unease, supply-chain threats, and other key issues that will impact risk managers this year.

2023 was a hectic and extremely challenging year for risk managers. The U.S. regional banking crisis grabbed headlines, with failures being blamed on everything from poor risk culture and ineffective risk modeling to interest-rate volatility – and even to the speed at which news travels in the social media era.

Geopolitical risk and supply-chain risk also contributed to an environment of volatility and uncertainty, fueled by the start of a violent conflict between Israel and Hamas, the ongoing Russia-Ukraine war, and attacks on commercial shipping vessels in the Red Sea. Technology, moreover, has evolved, with cyberattacks becoming more sophisticated and more prevalent, and with new innovations – like generative AI – bringing both risks and opportunities.

That leads us to today’s topic: namely, how will the remainder of 2024 shake out? What changes may be on the horizon, and which trends will have the greatest impact on the financial risk management landscape?

Cris deRitis, the deputy chief economist at Moody’s Analytics, sheds some light on what lies ahead for risk managers.  

Links From Today’s Discussion:

GBI® survey on energy security risk | Global Association of Risk Professionals (GARP) posted on the topic | LinkedIn

https://www.garp.org/garp-benchmarking-initiative

https://www.garp.org/risk-intelligence/modeling-risk/all

SPEAKER BIO:

Cristian deRitis is the Deputy Chief Economist at Moody's Analytics. As the head of model research and development, he specializes in the analysis of current and future economic conditions, consumer credit markets and housing. Before joining Moody's Analytics, he worked for Fannie Mae. In addition to his published research, Cristian is named on two U.S. patents for credit modeling techniques. Cristian is also a co-host on the popular Inside Economics Podcast. He can be reached at [email protected].

Hear veteran risk manager, advisor and professor Clifford Rossi’s viewpoints on trends, threats and opportunities in the commercial and residential real estate markets. 

The past couple of years have been an extremely challenging time for risk practitioners charged with measuring and managing real estate risk. In both commercial real estate and residential real estate, concerns have been raised globally about interest rates, inflation and economic uncertainty. Indeed, in a recent Federal Reserve survey on salient risks – part of the Fed’s October Financial Stability Report – roughly 75 percent of respondents cited the potential for “large losses on CRE and residential real estate.”

CRE, more specifically, has been plagued by escalating vacancy rates for office buildings, thanks in part to the remote work trend that started during the pandemic and has since taken off. Residential real estate, meanwhile, has dealt with worries about housing affordability.

As a former CRO at multiple banks and as an ex-senior risk manager at Fannie Mae and Freddi Mac, Cliff Rossi, our honored guest today, knows all about the CRE and residential real estate risks facing financial institutions today. Cliff, the current Director of the Smith Enterprise Risk Consortium at the University of Maryland (UMD), speaks with GARP editorial director Robert Sales about global real estate concerns and challenges, and offers advice on how firms can more effectively manage their exposures.

Clifford Rossi (PhD) is the Director of the Smith Enterprise Risk Consortium at the University of Maryland (UMD) and a Professor-of-the-Practice and Executive-in-Residence at UMD’s Robert H. Smith School of Business. He is also the author of GARP’s monthly “CRO Outlook” column.

Prior to entering academia, Rossi had nearly 25 years of experience in banking and government, having held senior executive roles in risk management at several of the largest financial services companies. His most recent position was Managing Director and Chief Risk Officer for Citigroup’s Consumer Lending Group, where he was responsible for overseeing the risk of a $300+B global portfolio of mortgage, home equity, student loans and auto loans with 700 employees under his direction. While there he was intimately involved in Citi’s TARP and stress test activities. He also served as Chief Credit Officer at Washington Mutual (WaMu) and as Managing Director and Chief Risk Officer at Countrywide Bank.

Previous to these assignments, Rossi held senior risk management positions at Freddie Mac and Fannie Mae. He started his career during the thrift crisis at the U.S. Treasury’s Office of Domestic Finance and later at the Office of Thrift Supervision working on key policy issues affecting depositories. Rossi was also an adjunct professor in the Finance Department at the Robert H. Smith School of Business for eight years and has numerous academic and nonacademic articles on banking industry topics. Rossi is frequently quoted on financial policy issues in major newspapers and has appeared on such programs as C-SPAN’s Washington Journal and CNN’s Situation Room. His book for risk practitioners and graduate students, A Risk Professional's Survival Guide, was published in 2014 by John Wiley & Sons, Inc. His research interests are in financial and nonfinancial risk management, risk governance and analytics and climate risk.

Hear from Wall Street veteran and author Aaron Brown about the impact of fast-evolving technology on risk management.

Financial institutions are now using everything from machine-learning modeling and generative AI to blockchain and public-key cryptography for risk monitoring, measurement and mitigation. What’s more, we can see on the horizon the development of other tools – like central bank digital currencies – that could further alter the landscape.

However, each of these technologies present their own set of challenges, and it’s important for risk managers to understand both their advantages and potential drawbacks.

Aaron Brown, a renowned author and former CRO of AQR Capital Management, has had a front-row seat to the evolution of technology in financial risk management.

He joins GARP editorial director Robert Sales to discuss the pros and cons of technological innovations, and to explore what’s on the horizon, drawing on his previous work as a trader, portfolio manager, head of mortgage securities and risk manager for several global financial institutions.

SPEAKER'S BIO

Aaron Brown teaches finance and mathematics as an adjunct at NYU and writes Risk Intelligence’s monthly “Tech Perspectives” column. He is a distinguished risk manager who has held a variety of high-level positions on Wall Street, dating back to the early 1980s. Most recently, he served for 10 years as chief risk officer of the large hedge fund AQR Capital Management. His books on risk management include The Poker Face of Wall Street, Red-Blooded Risk, Financial Risk Management for Dummies and A World of Chance. In 2011, he was named GARP’s Risk Manager of the Year.

In this podcast Zeynep Salman, Head of Risk Decisioning, EMEA at SAS, will explore the top trends and market practices for financial institutions as they adapt to digitizing credit decisioning.

We will dive deeply into key success factors for establishing innovative credit customer journeys while achieving successful business outcomes that keep the lending business profitable. We will also discuss how a country’s regulatory requirements and market dynamics can affect the transformation journey.

Link from today’s discussion can be found here:

The Value of Credit Risk Transformations and the Role of AI

Speaker’s  Bio

Zeynep Salman is a credit risk professional with experience managing originations, customer management, and collections teams for consumer and small business portfolios. She joined SAS in 2022 and is currently leading risk decisioning advisory activities across EMEA. Zeynep is passionate about driving automation, seamless customer experiences, convergence of credit and fraud evaluations across customer lifecycle, AI-driven customer engagements, and working with clients to support near and long-term strategic roadmaps to drive value.

Before joining SAS, Zeynep held key roles at financial institutions including Citibank, HSBC, Toyota Finance, and UniCredit, as well as software vendors such as FICO.

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Over the years, GARP and SAS have partnered to bring risk practitioners unique insights on a variety of topics related to risk management. Now we present a series of podcasts focused on making financial risk-based decisions in light of the rapid evolution of artificial intelligence and machine learning.

About SAS

As a leader in analytics, SAS’ award-winning capabilities in analytics, risk management, and other technology areas have helped customers across the globe solve their toughest and ever-evolving business problems. Its unrelenting commitment to innovation enables organizations across financial services to modernize and sustain a competitive edge. Through the latest developments in machine learning, natural language processing, forecasting, and optimization, SAS supports diverse environments and scales to meet changing needs. Learn more about how SAS is driving innovation and business value for risk and finance professionals at www.sas.com/risk