by Helen Cunningham
Robert Druskin joined DTCC in April as executive chairman, a new position at the company. He brings extensive financial industry leadership experience to DTCC, having worked in senior positions in banking and the global capital markets for decades. Druskin spent nearly 16 years at Citigroup and its predecessor companies in various senior positions. He also served as chairman of E*Trade Financial Corporation.
In this first article of a two-part series, Druskin talks about his areas of focus, the industry environment and his early impressions of DTCC.
Could you talk about your role as DTCC's first executive chairman?
DTCC and its Board of Directors decided to separate the roles of chairman and CEO, as many companies have done, to strengthen corporate governance and risk management. My position as executive chairman is somewhat unusual since I have executive responsibilities in addition to chairing the Board. The role is still not very common here in the U.S.; you tend to see it more in non-U.S. companies.
What are your primary areas of focus?
I spend a lot of time on risk management and controls because our three risk management areas - Systemic, Operational and Enterprise, which is credit, market and liquidity risk - as well as Internal Audit and Compliance, report directly into me.
Another priority is spending time with people on the leadership team to help them think through the major issues facing DTCC. I have a good deal of experience in the industry as a customer of DTCC, so my perspective is a bit different from some of the folks here. It's always useful to look at things through different prisms.
We have a focus on the strategic choices DTCC needs to make. The industry is going through dramatic change. Pick up the paper any day and you'll see exchanges in merger discussions. You'll see clearing houses coming together. You'll see interoperability starting to become reality. The environment in which we operate is shifting tremendously and the decisions we make will be very important to us and the industry, so we want to make them thoughtfully. Whether we choose to pursue an opportunity or let it go by, our course of action should always be derived from thorough and unbiased analysis.
I also work with our senior team to determine how we govern the company, how we set priorities and how we manage the budgeting process and other important initiatives.
What is an example of a strategic initiative the company is working on?
We're building an in-depth capital plan for DTCC. With the help of an outside company, we're conducting an analysis of our current capital position, our projected needs based on various scenarios and the form our capital should take in terms of different sources and instruments.
The goal is to make sure that, from a capital standpoint, we're appropriately structured to fund our strategic initiatives, meet the challenges we face and measure our results using a set of profitability and return-on-capital metrics.
We're undertaking this study against the backdrop of a competitive environment that gets tougher every day and regulatory changes that will create new capital requirements for both us and our participants. And, of course, how we are structured has potential implications for our participants' capital requirements. So we need to get it right. Some of our competitors have very flexible capital structures because they're public companies, whereas our options as a non-public company are not as broad or straightforward.
How is the new regulatory environment impacting DTCC?
Our role has become even more important since the 2008 financial crisis. Risk mitigation is what we do for a living. Many people think of us in terms of clearance, settlement And product delivery, but the people who really understand DTCC know that, at our core, what we do is identify, manage and mitigate risk - and that role has become magnified post-crisis.
Reducing risk in the markets is a priority today, so companies like DTCC have a broader, more important role now, and that expanded role is recognized and understood by regulators, legislators and the industry.
What is the thinking behind DTCC's decision to bring its systemic, operational and enterprise risk management areas under a single umbrella?
There are similarities that run across our three risk areas. So we see opportunities to assess and manage risk more holistically - across the company, across markets and across the firms that we service in multiple areas of their business.
By looking at our risk activities from one vantage point, we expect to pick up many efficiencies and synergies, not just in terms of streamlining the work or using the same data more effectively, but particularly in terms of "thought synergies." I think we'll make significant gains by centralizing our management across risk disciplines, rather than managing risk in a segmented way. And, as our business becomes more complex and global, and as we expand into new products and services, the need to look across the entirety of our risk functions becomes increasingly important.
Could you talk about the balance between mitigating risk and reducing the industry's cost of doing business with DTCC?
Cost containment remains a priority. One of our mandates is to deliver highquality, low-cost capabilities to the industry. But if we don't do a good job of risk mitigation, the rest can all go up in smoke. And in order to manage risk effectively, we have to make investments.
It's a topic that comes up all the time at DTCC. How do you balance the investment you need to make in risk against the challenge of delivering services that are not only cost-effective, but also well structured and efficient?
As business managers, we have to balance investment and return, and sometimes the return is building an infrastructure that is robust and intelligent enough to help the industry manage risk and avoid disasters. So those investments are critical to make, but we look at them carefully. We weigh them like any business weighs costs and benefits, and we try to make smart decisions.
What would you say about your new position now that you've been at DTCC for nearly six months?
I'm really enjoying it. DTCC is an important company that's doing important work, which is always fun. I like the people. They're very smart. They're very hardworking. And they have an enormous emotional attachment to the company, which is a very powerful thing. I've formed good partnerships across the company and I think I'm making a contribution.
And being in the middle of change is something I love. Change keeps things interesting.@