Global Risk Management on High Alert

Heightened risks in every corner of the business landscape are being met by methods that protect primary pain points.

General Electric Co. closed out 2002 with a new executive position devoted to global risk management. On Jan. 1, 2003, Mark J. Krakowiak, a corporate financial analyst in the office of the CEO, became vice president of corporate risk and financing, reporting to CFO Keith S. Sherin. Krakowiak now oversees cash forecasting for the company, works with external rating agencies and is involved in financing issues for GE's industrial businesses.

Given heightened risks in every corner of the business landscape and GE's global growth -- 2002 revenues registered $132 billion, up 5 percent from 2001 -- the new emphasis on risk management is a logical step. "Two of GE's four strategic imperatives deal with managing risk," Krakowiak says. "The first of these is to strengthen a capital-efficient company by maintaining our triple-A debt ratings, generating high returns on total capital, and reducing risk and volatility perceived in our four financial services businesses. The second imperative is that we intend to lead in transparency and governance."

GE's decision to elevate risk management to a senior position and the breadth of Krakowiak's responsibilities reflect the new face of global risk management in an environment of accelerated economic and regulatory change. A November 2002 PricewaterhouseCoopers survey of leading global financial institutions found that half have established new senior-level positions with companywide risk oversight responsibilities. A similar November 2002 survey by Oliver, Wyman & Co., a New York City-based global strategy consulting firm for the financial services industry, found that two-thirds have a chief risk officer or the equivalent.

In the financial services industry, the creation of senior-level risk management positions and the evolution of an enterprisewide approach have been driven in large part by new regulatory concerns. In other industries, governance issues are motivating many companies to buttress risk management's leadership and increase its resources.