The LIBOR Transition: A Risk Management Stress Event
ARRC Chair Tom Wipf and Gary Mandelblatt of NextGen Strategic Advisors discussed why the LIBOR transition should be viewed as a major risk management stress event and how firms can protect themselves from transition-related risks and financial losses.
While many firms view the LIBOR transition primarily as a regulatory event and are managing it as a compliance event, it is actually a significant market, credit and operational risk management stress event as well.
The LIBOR transition will potentially have a substantial P&L impact on many cash and derivatives trading businesses and a net interest revenue impact on the accrual asset/liability management portfolios. These P&L impacts are expected to begin as soon as the next few months and evolve over four distinct periods through December 31, 2021.
As a result, there will be financial winners and losers as the LIBOR cessation date approaches. Financial institutions who overlook the risk management implications and who do not prepare will lose money.
What can firms do? Risk management teams, along with their CEOs and senior management, will need to make a number of key decisions that will enable their firms to mitigate the risks and minimize P&L impacts. A focused and coordinated risk management effort will be required across all front office and control functions.
In this webinar, Tom Wipf and Gary Mandelblatt discussed:
- Market, credit and operational risk management impacts of the LIBOR transition
- Critical stress testing analyses and modeling that firms should employ now to prepare for the transition
- Key information required to inform senior management of risk exposures
- Strategies that can protect firms from risks and financial losses
Featured Speakers
Thomas Wipf
Tom Wipf is Vice Chairman of Institutional Securities.
Tom is responsible for Morgan Stanley’s transition efforts to alternative reference rates to replace LIBOR through the firm’s Global LIBOR Transition Steering Committee. This group, spanning ISG, Wealth Management and Investment Management, will ensure that all businesses and infrastructure organizations have a consistent set of Firm-level guidelines, their own transition plans and accountability for transition readiness before year-end 2021.
Tom most recently led the firm’s Global Business Continuity Management Organization, which is responsible for strategic planning and risk management for potential cyber and physical disruptions. He is a member of the firm’s Securities Operating Committee, Risk Management Committee and Asset/ Liability Management Committee.
Prior to being named Vice Chairman, Tom was the Global Head of the Bank Resource Management Division where he was responsible for the firm's secured funding, securities lending, global hedging and collateral management activities.
Beginning his career in the industry in 1977, Tom joined Morgan Stanley in 1986 and has been engaged in the Firm’s funding, collateral and hedging activities throughout his career at the firm. Based in New York, Tom has also completed multi-year assignments in Morgan Stanley’s London and Tokyo offices.
In April, 2019, Tom was named Chair of the Alternative Reference Rates Committee (ARRC) by the Federal Reserve Board. The ARRC is a group of private-market participants convened to help ensure a successful transition from USD LIBOR to a more robust reference rate. Tom was appointed Chair of the US Commodity Futures Trading Commission’s Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee in October, 2018.Tom served as Chair of the Treasury Market Practices Group (TMPG) until May 2019.
The TMPG is sponsored by the New York Federal Reserve and is an industry group committed to supporting the integrity and efficiency of the U.S. Treasury and Agency Mortgage Securities Markets.
Tom serves on the board of directors of International Swaps and Derivatives Association, Inc. (ISDA). Tom was appointed to the Alternative Reference Rate Committee, sponsored by the Board of Governors of the Federal Reserve in 2014. Tom previously served on the Financial Research Advisory Committee to the US Treasury Office of Financial Research from 2012 to 2017.
Gary Mandelblatt
Gary is a Managing Partner at NextGen Strategic Advisors with 33 years of experience working with financial institutions in managing market, credit and operational risks, managing regulatory relations, implementing regulatory requirements, defining strategies and building businesses. Gary was the Chief Risk Officer for Nomura Americas and Chairman of Nomura’s Global Dodd-Frank Implementation program.
Prior to Nomura, Gary was a Managing Director at the Lehman Brothers Estate where he was responsible for building the valuation capabilities for 1.2 million derivatives contracts, and hedging open risk exposures. Prior to that, Gary was the Global Head of Fixed Income Strategy at Lehman Brothers and helped build the commodities and emerging markets businesses.
Before joining Lehman, Gary was Managing Director at Smith Barney, Salomon Smith Barney and Citigroup and was a senior Market Risk Manager for Fixed Income and supported numerous regulatory efforts. Prior to that, Gary was a consultant with Coopers & Lybrand and First Manhattan Consulting Group.
As Chief Marketing Officer and Executive Vice President of Global Marketing & Corporate Communications, James leads the company’s global marketing and corporate communications efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to clients in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Since joining Numerix in 2008, James has launched the organization’s award-winning thought leadership program, bringing to light challenges and insights from Numerix market experts. He also hosts the Numerix Video Blog, tackling the challenges pressing the derivatives markets—from regulatory issues to trading strategies.
Prior to joining Numerix, James served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, he built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. Prior to Fitch, James was a member of the communications team at Moody's Investors Service.
