Middle Office is brought to life by John Rubino’s photographs of the steel sculptures in his compelling series, “Anatomy of a Calamity.” Each sculpture conveys a stage in the emotional history of trauma victims. Readers who have lived through a takeover, a bankruptcy, or a financial, reputational, or operational risk event that threatened the viability of their firm may see their own experience reflected in Rubino’s powerful art.
What This Book Covers
Here are highlights of the book’s contents:
- Part One: Leadership, Ethics, and Training addresses such topics as the nature of effective leadership in complex, post-industrial organizations; employee loyalty; on-the-job training; organizational silos; the volunteer’s dilemma; and managerial costing, a discipline that is often neglected in financial services companies. This part also has a review of Michael Goodkins’s memoir, The Wrong Answer Faster (Wiley, 2012).
- Part Two: Regulatory Compliance considers, among other topics, principles-based regulation; the employment impact of securities regulations; FINRA’s suitability rule; Basel’s leverage ratio and intraday liquidity indicators; the Canadian Securities Administrators’ rules or proposals for designated rating organizations, OTC derivatives, performance reporting, and electronic trading; and the SEC’s position on global accounting standards.
- Part Three: Risk Management discusses such topics as the classic distinction between risk and uncertainty; reputational risk; intraday liquidity risk; causal dependence; ISO 31000 and the revised COSO framework; FFIEC’s recommendations on cybersecurity; an approach to estimating the duration of surplus; managing central counterparty credit risk in line with the SEC’s regulation HH; and the biology of financial crises, based upon John Coates’s book, The Hour Between Dog and Wolf (Penguin, 2012).
- Part Four: Performance Measurement and Client Reporting tackles topics that notably include fair value accounting and the earnings impact of credit valuation adjustments; after-tax performance measurement; benchmark management; a reconsideration of value and growth investing; guidelines for controlling the use of spreadsheets; and suggestions for applying the Global Investment Performance Standards (GIPS®) to pension funds and alternative investments.
Who Should Read This Book
Middle Office will appeal to board members, C-suite executives, corporate trainers, compliance officers, risk managers, and the heads of investment performance measurement groups at banks, investment management firms (including hedge funds), and broker-dealers. Financial journalists will also find it valuable. In addition, regulators will see that the author does not sacrifice insightfulness for brevity in discussing issues they are vitally concerned about, such as the elements of sound internal risk management programs. Please take a look at the Table of Contents for Communities of Interest to see book’s coverage of industry segments and functional roles.
Advance Praise for Middle Office
“This is an excellently timed publication for anybody working in, connected to, or communicating with the middle office of asset management companies—a kaleidoscope of thoughts from Philip Lawton, my performance and risk hero.” Carl Bacon, Chairman, StatPro
“So refreshing, someone who actually understands the middle office, the value it can add, as well as the risk. Jargon and operational details may not be where senior management and the legal department want to go, but it is a necessity, and Philip Lawton is helping to close the gap.” Karen Becker, Senior Vice President, Securities Operations and Chief Compliance Officer, Funds, Calvert Investments
“Philip Lawton’s writing provides an insightful look at issues affecting compliance, performance measurement, client reporting, and risk management for financial services firms. Lawton is adept at making complex topics understandable and keeping the reader up to date with current issues impacting financial firms.”—Tom Robinson, Ph.D., CFA, CAIA, CFP®, Managing Director, Education Division, CFA Institute
“The author reflects on important topics in risk management in a refreshing manner. His writing style makes the book a pleasure to read.”—Andreas Steiner, Investment Analytics & Risk Management Consultant
Excerpt from the Introduction
“Every age has its problems, but managing banks, investment firms, and broker-dealers may never have been more challenging. The short essays collected here represent an unsystematic attempt to clarify some of the issues and, occasionally, to indicate lines of thought that seem promising.
The present volume contains most of the posts on leadership, regulatory compliance, risk management, and investment performance measurement that have appeared to date in a WordPress blog called, simply, Middle Office. Over the period in which these pieces were composed, we witnessed a series of untoward and rather unnerving events at well-known financial institutions: MF Global failed and clients’ funds went missing; a rogue trader was found out at UBS; JPMorgan Chase sustained huge losses in derivatives; Barclays and others were accused of falsifying LIBOR; Peregrine Financial entered bankruptcy amid charges of fraud; HSBC allegedly laundered money for drug cartels and dealt with firms linked to terrorism; and Knight Capital lost control of a high-frequency trading algorithm.
Such occurrences—for the most part ethical lapses and operational breakdowns—raise pressing questions for regulators, boards, and senior management. Directors and officers are primarily concerned about their own organization’s culture and internal controls, while regulatory authorities are additionally worried about resultant threats to the complex, fragile, jerrybuilt financial system….”
If you wish to purchase multiple copies of the paperback for distribution to the board of directors, clients, or colleagues, or for use in class, please email the author.
Special Offer for PRMIA Members
Middle Office is a PRMIA Partner Publication. Members in good standing of the Professional Risk Managers’ International Association (PRMIA) may purchase the paperback at a 20% discount from the retail price. To take advantage of this members-only benefit, click here and enter the coupon code NVTKKQZC during the checkout process.