Management Strategies

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Executive Profiles: Merrill Lynch, Wells Fargo, GMAC, Freddie Mac, and SSGA

Five business-technology execs outline strategies that help their companies navigate a fast-changing, competitive market.

Marc Baumslag
Real-Time Risk Management

Merrill Lynch & Co.'s Marc Baumslag, chief technology officer of liquidity and risk technology, is the point man for systems used to manage risk at the company. It's a job for which speed is of the essence. Global Markets and Investment Banking, which includes Merrill Lynch's equities, foreign-exchange, bond, and derivatives-trading operations, is "a time-to-market business," Baumslag says.

His primary customer is Kevin Cox, the company's deputy CFO and head of global liquidity and risk management, who in turn reports to CFO Jeff Edwards. Baumslag, 44, has used his position within the upper echelons to put into action ideas, such as grid computing, crafted during a career that has spanned academia, where he did post-doctoral work in France on parallel computing, and Wall Street, where he built risk models and software for Citibank and Bear Stearns before joining Merrill Lynch in 1999.

Today, Baumslag, who earned a doctorate in computer science from City University of New York, is pushing grid computing as an alternative to adding servers for the firm's overwhelmingly computer-intensive applications. Merrill Lynch has several "proofs of concept" under way, he says. "We have a large pool of hardware; the question is, how do we effectively use it for the firm's benefit?"

Marc Baumslag's first priority at Merrill Lynch was to consolidate its risk infrastructure. -- Photo by Steve Moors

Baumslag's first priority at Merrill Lynch was to consolidate its risk infrastructure.

Photo by Steve Moors

Marc Baumslag,
chief technology officer of liquidity and risk technology

Age: 44

Company: Merrill Lynch

Headquarters: New York

Assets: $650 billion

Responsibilities: Oversees technology that manages credit, market, and liquidity risks

Accomplishments: Helped create a data warehouse for risk data; promotes grid computing and services-oriented architecture

His challenge: "We have a large pool of hardware. The question is, how do we effectively use it for the firm's benefit?"

Risk decisions involving hundreds of millions of dollars are made throughout the day on the trading floor, where traders access market data and risk analytics; in the finance division, where the books are kept; and in the risk division, which adjusts the company's exposure to market and credit risks. Baumslag and his team have built a services-oriented architecture to support Merrill Lynch's trading operations. In foreign exchange, for example, a services-oriented application called Real-Time Limits Checker lets trading systems connect to the credit system to determine the incremental risk of a trade in near real time, typically less than 100 milliseconds.

Yet until recently, these areas lacked a common storehouse of information and applications; instead, they operated their own siloed systems. "When I joined in 1999, the risk-management infrastructure was splintered," Baumslag says.

His first task was to consolidate that infrastructure. His team spent 2-1/2 years, until 2003, consolidating the credit-risk platform, reducing by half the number of systems and cutting associated maintenance costs. Most significantly, they created a data warehouse for storing reference data such as credit ratings. "When you do credit risk management, you need to collect all of the firm's data in one place," Baumslag says.

He realized that the same data also could be used to perform other functions, such as calculating regulatory capital (funds required by law to be set aside to cover potential losses), pricing derivatives, and managing the company's liquidity. "What started as just a credit system serving several hundred users has grown to incorporate margining, legal and compliance, liquidity risk, and various other finance functions, in excess of 1,500 users," Baumslag says. The multifunctional nature is evident in the warehouse's nickname, Architecture for Regulatory, Credit, and Treasury Consolidation, or Arctic.

Consolidating risk and liquidity management has saved the company money and helped set the stage for compliance with Basel II, a set of risk guidelines adopted last year by the Bank for International Settlements, the governing body of the world's central banks. Says Baumslag, "Lots of firms have put credit- and market-risk technology teams together, but not a lot have included liquidity risk. But it makes perfect sense with Basel II."

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