Everyone Is a Risk Manager
Risk comes in many shapes and sizes at Freddie Mac. Some risks – such as credit risk and interest-rate risk – are obviously a highly visible and top-of-mind part of our business. Those risks are always with us, and we are experienced at identifying and managing them.
But other risks are less predictable. Like all organizations, Freddie Mac faces inherent risks in our processes and procedures, our relationships with counterparties, our models and methods, our technology systems, and in the routine tasks that each of us carry out every day. These risks can sometimes remain in the background – until a problem arises that unexpectedly brings them forward. At the same time, we know there will always be some risks that we need to explicitly accept in the interests of achieving critical objectives – as long as these risks are properly evaluated.
For any business to succeed today, it must be a world-class manager of risk. That's a tall order for any organization, but it's an absolutely critical one for Freddie Mac. To reach that goal, we're reinforcing a strong, disciplined risk-management culture here – a culture that is focused on making every employee at our company a skilled and proactive risk manager. Our motto is simple: everyone is a risk manager.
"Risk management" can be a broad and hard-to-define concept. To help every employee at Freddie Mac understand the importance of risk management and his or her own role in managing risk, we've outlined a set of five basic risk-management principles that guide everything we do. These principles help us better understand effective risk management, become more aware of the risks we face each day, and better escalate risks before they become problems for the company. They can apply to any organization that manages risk.
- Know and understand your risk profile
- Take ownership of risk: be proactive and preemptive
- Question every assumption
- Be transparent in managing risk
- Set a proactive, frank tone for risk management
In real, everyday terms, what does that mean? It starts with employees recognizing the specific risks associated with their jobs and how those risks affect the company. It also means everyone needs to have the ability to "roll with it" – risk management is a dynamic process – and never underestimate the unexpected. We also must have open and honest communications about risk, and be prepared to "surface" risks quickly and act on them with a sense of urgency. And we must always ask questions about risk – and ask those questions early and often.
It's important to emphasize that evaluating and managing risk is not a check-the-box exercise. Risk management is not simply going through a process or procedure, but thinking through and discussing the issues to confirm that we're focused on the right ones. Indeed, we must all carefully consider the various risks we face and how best to avoid, accept or mitigate those risks without unduly impeding our business priorities.
Managing risk is everyone's job. By following these simple principles, all of us at Freddie Mac are working to become better, more proactive managers of risk – and helping to build an even stronger risk management foundation for our company.
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