Soldiers enter the Olympic Park in London. The city is planning a spotless showcase - but it is a risk that must be managed. At business schools, managing risk has become a hot topic.
The Globe's weekly Business School news roundup
Be it safeguarding athletes and attendees from a terrorist attack, the 2012 Olympics, opening Friday, share something in common with rogue traders and drought – risk.
Whether it is staging a safe sporting spectacle, protecting the financial health of a company or insuring against crop loss, managing risk is a hot topic at business schools. New government regulations after the 2008 financial crisis and a recent spate of big-bank scandals (J.P. Morgan and Barclays among them) have only intensified demand for those able to identify threats and limit the chance of bad things happening.
"The whole field of risk management is exploding," says Rick Nason, associate professor of finance in the faculty of management at Dalhousie University's School of Business.
Employers want B-school graduates with high-end math skills to apply risk management tools, such as derivatives, as well as the capacity to look beyond the numbers at qualitative "what if" scenarios that could disrupt company operations.
In response, some schools are revamping their curriculum.
This fall, Dalhousie plans to roll out a revised enterprise risk management course for its MBA Financial Services. Separately, it will offer a non-credit, two-weekend seminar in credit risk management.
York University's Schulich School of Business has modified its Master of Finance to introduce a specialization in financial risk management this fall.
"The intention of the Master of Finance introduced three years ago was to produce students in investment banking, but after the 2008 financial crisis the investment banking business is declining," says Melanie Cao, a professor of financial engineering and co-ordinator of the new specialization.
For the 12-month program, students who choose the financial risk specialization will study a variety of topics including derivative securities and enterprise risk management.
"There is a demand for this cohort," says Prof. Cao, citing industry requests for students trained in risk management as it applies to markets, day-to-day operations and other issues. "I am very hopeful that students with this [new] specialization will have an easier time getting a job."
Meanwhile, the Rotman School of Management at the University of Toronto has several long-established courses on derivatives, trading risks and industry regulation in its MBA and Master of Finance programs.
Banking industry officials welcome the growing array of offerings at business schools.
"After the [2008] crisis, the appreciation and demand for risk professionals has skyrocketed," says Stephen Hart, executive vice-president and chief credit officer for the Bank of Nova Scotia. One reason for the demand, he notes, is increased government oversight of the financial services sector.
"All the global regulators are looking at the independence of risk within financial institutions," he says, with firms expected to have procedures and controls in place to limit destabilizing activities by rogue traders or others.
At his bank, Mr. Hart says, "we are looking for people who have a good underlying basic knowledge of financial analysis but then can move past that and start thinking through the 'what if' scenarios."
Dalhousie's Prof. Nason, who teaches corporate finance, investments and derivatives, says that learning how to protect against bad things happening does not mean that risk can – or should – be eliminated entirely.
"Those who don't take risks don't make any progress," he says.
New appointments
The University of Toronto's Rotman School of Management has added seven new faculty – including two Canadians – recruited from several top American schools.
Chayawat Ornthanalai, from the Georgia Institute of Technology, comes to Rotman as an assistant professor of finance with a focus on asset pricing and credit risk. Will Cunningham, from Ohio State University, will be an associate professor in U of T's department of psychology with a joint appointment at Rotman in marketing. Both are returning Canadians.
The other appointments include Spike W.S. Lee (University of Michigan), an assistant professor of marketing; Andras Tilcsik (Harvard University), assistant professor of strategic management; and Heski Bar-Isaac (Stern School of Business at New York University), associate professor of business economics. As well, Aida Wahid, an assistant professor of accounting at U of T's Mississauga campus, and Sam Maglio, an assistant professor at the Scarborough campus, have cross-appointments at Rotman.
The new hires (excluding the cross-appointments) bring Rotman's faculty roster, one of the largest in the country, to 121 professors.
Rewarding career
Chartered financial analysts saw their total compensation (including bonuses and stock options) rise by 11 per cent last year to an average of $239,215, according to a survey by CFA Societies Canada. The Canadian organization is affiliated with the CFA Institute, which administers curriculum for the designation and sets voluntary standards for the investment industry.
Of those who participated in the survey of 2,135 CFA members, two-thirds of them held other degrees and designations (including 26 per cent with MBAs) and more than half said they managed assets averaging $3.5-billion.
"The findings show that obtaining the CFA designation is well worth the time and effort," Janine Guenther, Canadian representative on the presidents' council of the CFA Institute, said in a news release.
Jennifer Lewington