Morgan Stanley’s board of directors approved, on 25th December, Christmas Day to many of us, the formation of a standing risk committee. Bizarre. After a pretty difficult time being long some of the wrong risks in 2008 and early 2009, Stanley has been slower than most to embrace the asset price rally of the second half of 2009. In the parlance Stanley have been whip-sawed, long when they should have been short and short when they should have been long. Is a standing risk committee the solution?
With John Mack focusing on the role of chairman, Morgan Stanley co-president James Gorman steps up to the CEO role. Is the formation of the standing risk committee linked to the personnel changes in the executive suite? To get to the top of a prestigious if somewhat tarnished organisation like Morgan Stanley you have got to be good. Competent, capable, smooth and good with clients.
But what Morgan Stanley really need is someone at the top who can improve their lamentable record managing market risk. Maybe Mr Gorman knows that a career in strategy and private banking is not the best preparation for that role, hence the standing risk committee. When we find out the balance of risk-taking hawks and risk-avoiding doves on the risk committee, we will have an important clue to what kind of organisation Stanley plans to become in the years ahead.
Banquo is still an active investor so will declare his financial interest where appropriate in any blog post.