Bob Druskin, Non-Executive Chairman, DTCC
As Executive Chairman, Robert Druskin was a central figure behind The Depository Trust & Clearing Corporation’s (DTCC) evolution over the past 5 years, helping to transform the firm into a more client-focused, commercially-oriented and globally-minded company with an expanded mission to serve the industry.
Druskin joined DTCC in April 2011 after the company announced it was separating the roles of Chairman and CEO to ensure a best-in-class approach to DTCC’s governance and risk management oversight. He brought decades of executive-level experience to DTCC and used his deep knowledge of financial services and unique perspective on issues to help the company expand its global footprint, restructure to meet the evolving needs of clients and launch new businesses to help the industry efficiently and cost-effectively meet regulatory initiatives and internal goals and objectives.
With his transition into his new role as Non-Executive Chairman on January 1, 2016, Bob sat down with DTCC Connection to share his thoughts on the firm’s progress, new areas of opportunities and the challenges that lie ahead.
DC: Your tenure as Executive Chairman coincides with a period of dramatic transformation both in the global markets as well as for DTCC. How would you characterize your five years at the firm?
BD: It has been a very exciting and challenging five years – one of my favorite jobs ever. The financial services landscape has undergone dramatic changes during my time here, and firms today are facing significant pressures. Return on equity is down; capital requirements have risen; and compliance demands have grown exponentially. The industry is looking to DTCC more than ever for solutions to help them better manage risk, reduce costs and create capital efficiencies. This has presented us with new opportunities to grow our role in the industry and broaden our impact on global markets. We have evolved to help clients meet these new challenges, and while I recognize it is a journey, I am proud of the progress we are making.
DC: What were some of the top challenges that DTCC faced when you first joined as Executive Chairman?
BD: While the company was performing well when I first joined, we recognized that the industry was at an inflection point due to changes in the economic and regulatory environments resulting from the financial crisis. In surveying the landscape and DTCC’s future role in the industry, we knew that we had to evolve the firm to become more client-centric and commercially minded and that we had to empower employees to speak up and challenge the status quo.
In addition, the Executive Chairman role had been created, in large part, to address regulatory challenges the company faced in 2009 and 2010, which required the Board to be deeply involved in day-to-day management. That’s why we put a lot of time and thought into strengthening the senior management of the firm, allowing the Board to refocus on its primary role of strategic oversight.
Another challenge we faced was that the company was moving into a period of expansion where significant investments were needed to better position the firm for the future. We needed to prioritize our investments and make sure that we were getting a proper return on them.
DC: How much progress has the company made in these areas?
BD: DTCC has become much more client centric over the past five years, and while we still have a way to go, I believe clients are beginning to see improvements in our engagement with them. When I started at DTCC, we called our clients members or participants. Now we recognize them as clients, and we are doing a better job at becoming a partner and advisor. Evolving into a client-centric organization is more than words – it’s a mindset, an attitude and an approach. This transformation will become even more important as we face greater competition in both our Solutions businesses, including Global Trade Repository, Clarient Global LLCTM SoltraTM and DTCC-Euroclear Global Collateral Ltd.) as well as with our core services.
"Effective risk management today requires having a holistic view of the firm, which includes understanding and managing the more traditional areas like credit, market, interest rate and liquidity risk as well as additional risks like technology risk, physical security and business continuity."
In addition, we have become much more commercially minded. Even though we are not a typical commercial enterprise, we have a responsibility to ourselves and our stakeholders to operate the firm in a way that produces optimum results for the industry. In order to accomplish that, we have to be financially strong so that we can make the investments needed to continue innovating and moving forward.
I am also pleased with our efforts to empower employees, which has been so important in strengthening processes, enhancing efficiencies and improving communications. This evolution in how we operate builds upon the already strong culture of collaboration and partnership that is part of the DNA of the firm. DTCC was a very good company when I arrived five years ago, and by working together across the organization, I believe we’ve made great strides and are a better company today.
DC: You said that your decision to move into the non-Executive Chairman role was directly tied to the state of the company. How do you think the company is doing?
BD: The company is doing very well, and the Board is pleased with the state of the firm. We are driving innovation and thought leadership, which is evident, for example, in our work to shorten the settlement cycle and produce white papers on systemic risk, distributed ledgers and central counter party (CCP) risk management. We’ve also made major investments in the company’s risk management, technology and infrastructure to modernize our capabilities and systems. In addition, we’ve strengthened the senior management of the company by restructuring the Management Committee to bring in greater diversity of opinion and viewpoints. Our Managing Directors and Executive Directors have shown exemplary leadership, and we have a deeper bench of talented individuals than at any point in our recent history. When you combine all those factors, you can see why I am confident about DTCC’s future.
DC: Wall Street has always been about risk management and preserving capital. At DTCC, risk management reported directly into you as Executive Chairman. How has the notion of risk in the financial industry evolved during your career and how has DTCC brought innovation to its mission to mitigate risk?
BD: During my career, there have been periods when risk management was the top priority and received a great deal of attention. Other times, such as the lead up to the financial crisis, risk standards relaxed in certain areas. Now, we are again in a period of heightened risk awareness and management. If you look back over time, the focus on risk seems to ebb and flow every few years.
The most significant change in risk management since the crisis is how much the concept of risk has broadened. Effective risk management today requires having a holistic view of the firm, which includes understanding and managing the more traditional areas like credit, market, interest rate and liquidity risk as well as additional risks like technology risk, physical security and business continuity.
If you look at the risk issues we face today, they are very different than just a few years ago. In some cases, the risks that are prioritized today may have barely registered on a firm’s radar a few years ago. Cyber security is a good example. For many companies, cyber security was an issue but not the issue. Today, it is probably the number one risk facing the industry. Interconnectedness and systemic risks are two other examples.
Looking to the future, I expect that we will continue to see a lot of pressure on our risk management programs to keep raising the bar. The industry has learned its lessons from 2008 and 2009, but if we have a period of strong earnings and the economy is doing well, there’s no guarantee that standards won’t relax again. The industry is wiser though, and I think regulators will continue to take a more active role in preventing dangerous buildups of risks from occurring again.
DC: How do you see DTCC’s role in the global marketplace evolving in the future?
BD: DTCC’s strength is its ability to leverage its size and scale to create efficiencies and economies and to reduce risk. As I mentioned earlier, as financial institutions continue to face cost, capital and compliance pressures, they will need companies like DTCC to help them meet their obligations in the most effective manner possible. The DTCC Global Trade Repository is a good example of how we are leveraging our unique position to enable firms to report their derivatives transactions on a global basis for all five major asset classes. We’ve built a solid service, and the GTR business is on a very good trajectory. If you look at our newer businesses like Clarient and Global Collateral, we are bringing this same approach to challenges related to client entity data and collateral management.
DC: What will be your top priorities as non-Executive Chairman of the Board?
BD: I will have a number of responsibilities, but most importantly, I will work to maintain the strong relationship between the Board and DTCC’s senior management. We are very fortunate to have a group of smart and dedicated Board members who do a tremendous amount of work for this company. I hope to act as an effective conduit between the senior leadership of the firm and the Board to make sure both sides understand the issues and priorities and are working collaboratively to advance the company.