Viewpoint on Risk Management
With Dr. Bennett W. Golub
Amid today's highly volatile markets, the topic of risk is taking center stage. Dr. Bennett W. Golub, Chief Risk Officer and co-head of the BlackRock Risk & Quantitative Analysis Group, explains why managing risk entails more than avoiding it.
What is the greatest misconception about risk management?
Many believe risk management is solely about protecting a portfolio from losses. In fact, risk management has a great deal more to do with analyzing and taking on appropriate types of risk in an effort to achieve returns that surpass the market. By avoiding risk altogether, many investors pay the price of lost opportunity.
How is risk management integrated into the investment process?
BlackRock portfolio managers have access to proprietary technology that allows them to analyze individual securities, aggregate a portfolio of securities, and compare that portfolio's risk characteristics to a relevant benchmark. Our portfolio managers are assisted by a dedicated team of more than 150 risk professionals, our "independent skeptics," who are trained to question portfolio holdings and rigorously test all portfolios. They consider what the addition or exclusion of certain holdings might mean for a portfolio's results and execute hypothetical stress tests designed to determine how a portfolio might react to changing market conditions
What differentiates BlackRock as a risk manager?
Our team and process are first-rate, but our risk management technology platform is perhaps the true feather in our cap. At the firm's founding in 1988, BlackRock's leaders had a vision for a tool that would help asset managers to prudently manage risk. Having determined that no existing system adequately fulfilled this need, we designed and built a proprietary state-of-the-art system, which evolved into the risk-management technology platform known as BlackRock Solutions®.
What's the upshot for investors?
All BlackRock investors – from the largest institutions to each individual investor – benefit from our risk management expertise. No portfolio is excluded from risk analysis. Our goal is to seek to deliver what investors need to achieve their goals: consistent investment results with fewer surprises.
Managing Director, Head of the Risk & Quantitative Analysis Group
Archived articles are current as of the original date of publication.