East Coast CIO Forum – Jun 26, 2008

Hi Everyone,

As a follow up to our June 26th meeting, we would like to thank David Hirschfeld, of Morgan Stanley for hosting our East Coast CIO Forum event and for kicking off the discussion on core competencies.   Special thanks to Josh Rosner, Managing Director at Graham Fisher & Co., for sharing his views on the current market, and to Matt Chung, Global Head of Technology Quality & Risk at Barclays Bank, for flying in from London to share his views on Risk Management.  To all our new guests, thank you for adding a new perspective to our meeting.  To all of our regular attendees, thank you for your ongoing support.  To everyone,   thanks for not being a shy crowd, and for voicing your thoughts and opinions loud and clear!!   The meeting would just not be the same without you!

Some thoughts from the meeting included the following:

From Josh Rosner re: The Market

Model failure – The root of the housing, structured finance, ratings and macroeconomic volatility.

  • We lowered the bar on mortgages, for 200 years we had to put 20% down.  Mortgages were made by local banks in the communities where people lived.
  • We then introduced automated underwriting, as opposed to “people” doing the underwriting.
  • Appraisers used to be independent, not representing the real estate agents.
  • Automated valuation models changed the way we look at defaults.
  • We are not out of the woods yet, not by a long shot.   The problem is widespread, global, and under-reported, caused by a variety of factors, not least of which were breakdowns in process and reporting, as well as analytics.
  • To mitigate this problem, a suggestion was made to have the banks coordinate an agreement on valuing tranches so that the current recession would not be as prolonged or as deep.

From Matt Chung re: Risk Management

Risk Management:  Are we doing the right things, or are we just doing things “right”?
What are the big issues facing the industry today in managing operational risk?
Statutory requirements vs. Best Practices…when does it make more sense to “just clear the bar” rather than aim for world records?

  • Risk management touches many areas of an organization.    The approach to risk has a lot to do with the philosophy and culture of a company.
  • Operational controls are clearly needed.
  • Meeting Regulatory and Industry attestation requirements can be extremely expensive and time consuming.
  • In the Regulatory space, the PCAOB and SEC realize this and changes have been made to make it easier to for companies to comply.
  • IT organizations need to ensure they don’t get mired in the “controls effectiveness” game, where they miss managing real risk for the sake of managing just controls.
  • SOX and other new regulatory regimes help get the topic of risk and controls into the conversations at the top table; senior IT leaders need to use this to great effect to ensure programs get funded to mitigate key risks such as Logical Access Management and Business Continuity Planning.
  • An industry standard framework, such as COBIT, in conjunction with direct management of residual risks on key topics is the key to success in ensuring IT organizations get the most “bang for the buck”.

General Observations:

Top Priority Challenges for the Group:

  • Data was the number one challenge on everyone’s list.  Systems integration was a critical close second.
  • Outsourcing (hardware, people, operations, and software development) is still a challenge, especially with product and vendor management.
  • Regulatory requirements –are they accomplishing their goals?
  • New (financial) products are really important for both small and large firms.
  • Changing times: today’s technology has leveled the playing field for the smaller players (vs. the old days when only large firms could afford cool and exciting stuff). The pace of change is now a challenge for everyone.

Once again, we thank you all for sharing your thoughts and experiences on all these topics, as we continue addressing the fluctuating market, and the impact of Risk Management in our respective companies.

Thank you again for joining us, and looking forward to seeing you all in the fall!

Wishing you all the best for the summer of 2008.

-malka
Malka Treuhaft
Executive Director East Coast CIO Forum &
President
Truision Inc.
646.942.2625 (office)
917.589.1069 (mobile)
718.375.1529 (fax)
www.truision.com

AGENDA

Hi Everyone!

We would like to thank David Hirschfeld, of Morgan Stanley,  for once again hosting our next East Coast CIO Forum meeting, on Thursday evening, June 26th, 2008.    We will be providing logistic details to those registered in early June.   Thank you all for the huge response to this meeting.  We have reviewed all of your ideas and recommendations, and have concluded on the following agenda:

  • Mathew Chung – Global Head of Technology Quality & Risk at Barclays Bank in London (see bio below)

Risk Management:  Are we doing the right things, or are we just doing things “right”?
What are the big issues facing the industry today in managing operational risk?
Statutory requirements vs. Best Practices…when does it make more sense to “just clear the bar” rather than aim for world records?

  • Joshua Rosner –  Managing Director at Graham Fisher & Company (independent research consultancy)  (see bio below)

Model failure – The root of the housing, structured finance, ratings and macroeconomic volatility

  • David Hirschfeld – Managing Director, Morgan Stanley (see bio below)

 Given what we have heard… what should our core competencies be today vs. yesterday?

  • Group discussion

Where do we go from here?

The attached list reflects the companies currently registered for the meeting.

 Morgan Stanley,  Lehman Brothers, XL Capital, Citibank,  Deutsche Bank,  Wexford Capital LLC,  Perry Capital Management, Credit Suisse, Eton Park,  Caxton Associates, Viking Global,  WWE (World wrestling Entertainment Inc),  NewEdgeGroup (FIMAT),  SBLI USA Mutual Life Insurance Company,  Financial Guaranty Insurance company (FGIC), Markit,  Promontory Financial Group,   Alliance Bernstein, Linkstorm,  Barclays Bank,   Exigen Capital, Ionic Capital, York Capital, Plural Investments, Highbridge Capital Management LLC, Moore Stephens,  McCann-Erickson Advertising, Soros Fund Management LLC,  Touro College, NewEdge Group(FIMAT), DMjM Harris, Merril Lynch, Moore Capital, EtonPark, AQR Capital, Maverick Capital, Pequot Capital, Beth Abraham Health Service,  NY Jets, Nextjump,  Level Global Investors, Bunge Ltd., Klik,  MBIA Insurance Corp, Standard & Poors, Platinum Reinsurance, Security Capital Assurance, First Funds.

If you have registered for the meeting,  but do not see your company listed, please contact us asap.   Registration will remain open for a limited time, after which we will register people on the waiting list.  Again, we do limit attendance at our meetings in order to allow for a more enjoyable and interactive evening.   We once again ask you to be considerate in letting us know in advance if your plans have changed so that we may accommodate individuals on the waiting list.

Thanks again for your ongoing support, and looking forward to another smashing event!!

BIO’s

Matthew Chung – BIO

Matthew Chung is currently the Global Head of Technology Quality & Risk at Barclays Bank in London, United Kingdom.  His group is made up of approximately 1,000 professionals across the globe in the areas of Risk Management, Process Engineering & Improvement, Quality Assurance, and Governance & Assurance.  He has 20 years of experience in technology within the financial services sector including the following senior positions: Managing Director-Head of Enterprise Data & Architecture at Moody’s Corporation, Managing Director-Global Head of Technology Architecture Group at Credit Suisse First Boston, Managing Director-Global Head of Infrastructure at Société Générale, and Director-Head of Corporate Computing North America at Nomura Securities International.  Matthew has a degree in Electrical Engineering from Steven’s Institute of Technology and currently resides and works in the UK as a US expat.

Joshua Rosner – BIO

 Joshua Rosner is Managing Director at independent research consultancy Graham Fisher & Co and advises regulators and institutional investors on housing and mortgage finance issues. Previously he was the Managing Director of financial services research for Medley Global Advisors, the premier provider of policy information on monetary, fiscal, regulatory and political developments to many of the world’s leading banks, mutual funds, hedge funds, and other institutional investors. Mr. Rosner was among the first analysts to identify operational and accounting problems at the Government Sponsored Enterprises and one of the earliest in identifying the peak in the housing market, the likelihood of contagion in credit markets and the weaknesses in the credit rating agencies CDO assumptions.

Mr. Rosner’s work on the Government Sponsored Housing Enterprises, Credit Rating Agencies and mortgage markets resulted in invitations to present to the Senate Banking Committee, Forecasters Club of New York, Professional Risk Managers International Association, ABSummit Geneva, The National Association of Business Economists, National Association of Business Economists Financial Roundtable, the American Enterprise Institute, the American Real Estate and Urban Economics Association, the Global Fixed Income Institute, CFA Institute, the Hudson Institute, The Chicago Fed Annual Bank Structure Conference and the Fixed Income Forum. He has also privately presented his research to leading policy makers, legislators and regulators.  Mr. Rosner has co-authored papers on the risks of Collateralized Debt Obligations to the mortgage finance market and the risk of mis-application of ratings in the structured finance market. Earlier, Mr. Rosner was an Executive Vice President at CIBC World Markets and a Senior Vice President at its predecessor firm, Oppenheimer and Company.

David Hirschfeld – BIO

Mr. Hirschfeld is currently a Managing Director at Morgan Stanley. He was COO of the Modelware Department, which provided the infrastructure for much of Equity Research and the equity fundamental analytics supporting Banking, Private Equity and Sales. He is now leading a new “practice area” within the Institutional Sales and Trading group managing all Time Series Systems and providing a unified approach across all business units and data domains . Prior to joining Morgan, he was SVP, Operations at Asset Control, a leading vendor of Data Management software. During his more than 25 years in the Financial Markets, he has had a variety of both trading, analytical, operational and technology jobs. These jobs have been at both buy side (Citadel Investment and Tudor Investment) and sell side (Morgan Stanley and Merrill Lynch) institutions. In his trading capacity, he has worked as a derivatives floor trader, an Index arbitrageur and a “black box” systems trader.  He holds an undergraduate degree in Economics from Duke University as well as a Masters Degree in Economics from the University of Chicago.