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Implementing Enterprise Risk Management by James Lam

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CHAPTER 10The View from the Risk Chair*

INTRODUCTION

In September 2012, I received a call from an executive* recruiter representing the Board of Directors of E*TRADE Financial. He said the company was looking for a new director “with risk in his or her DNA.” On November 14, 2012, I was appointed to the Company's Board, and also named Chair of the Risk Oversight Committee (ROC) and a member of the Audit Committee. Serving on a public company board had long been one of my professional goals, so this was a joyous occasion.

The general public may know the Company best for its Super Bowl commercials featuring a cute talking baby. Today, our advertising campaign features the popular actor Kevin Spacey. Perhaps this change is a good metaphor for the evolution of the company from an Internet darling to a mature S&P500 company.

TURNAROUND STORY

E*TRADE has an interesting turnaround story. Having executed the first-ever electronic trade by an individual investor more than 30 years ago, the company was an early digital disrupter, commonly known as a FinTech today. But in the 2007–2008 period, the Company found itself on the brink of collapse due to sizable, ill-timed investments in mortgages and other asset-backed securities that deteriorated during the economic crisis. This set off a series of events that—over the course of five years—led to troublesome capital position, activist investor pressure, and intense regulatory scrutiny. The Board and management team worked tirelessly to ...

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