Get to Know Our Head of Risk Management & Control: Geoff McAlister

Get to Know Our Head of Risk Management & Control: Geoff McAlister

January 14, 2022

Hi Geoff, welcome to the Hex Trust team! Please tell our community a bit about yourself

Thank you kindly, very happy to join the team!

I’m originally from Australia and I’ve been fortunate to gain international experience, including emerging & developed markets, in London, New York, Sydney, UAE & across Asia with leading banks including Goldman Sachs, Deutsche Bank, Credit Suisse, RBS & Westpac.

I’ve built over 20 years of industry experience in roles across Risk Management, Treasury, Global Markets, Institutional Banking & Finance covering all traditional asset classes, with a commercial lens and extensive experience of the systems, governance and risk frameworks required for the effective risk and economic management of Financial Institutions.

2. What initially got you interested in the digital assets ecosystem?

To be honest, it was the cracks & flaws in our legacy financial system that became more and more obvious from 2007 onwards, at least for me, I know many people were aware of the underlying issues for a long time.

Inflation being a key feature & challenge of our legacy financial system became clear to me when I was validating the Inflation Swap model for a large bank in the late ’90s. It was clear that official inflation measures are incomplete and detached from people’s real experiences. This became more obviously problematic with the Real Estate bubble which drove the 2008 global financial crisis.

I’m hopeful solutions may be developed in the digital asset ecosystem which will be more supportive of prosperity generally.

3. What was it about Hex Trust which made you want to join the team?

Firstly, I’m a big believer in infrastructure and its ability to deliver & underpin important economic development. Hex Trust with its institutional-grade safe custody solutions is providing key infrastructure to the digital asset / DeFi world, which will form part of the backbone of the industry to enable the broad adoption of digital asset & DeFi solutions. With my risk hat on, this is a solid choice.

Secondly, the group is building out HT Markets to provide balance sheet/financing solutions and Market Services to the industry and I see this as a major growth opportunity.

I’ve also been fortunate to have worked with Alessio previously and have met Rafal, Marty & others at Hex Trust over the years, so I’m confident in the quality and ambition of the management team.

4. You’re our ‘Head of Risk Management & Control’, tell us more about what this means in the digital asset custody world and what measures are you putting in place?

Hex Trust has delivered institutional-grade custody solutions for the digital asset ecosystem and already has in place significant governance on the risk side, I’m here to help Risk Management & Control to scale and grow to support a rapidly growing organisation.

Structure is incredibly important and that means a clearly structured institutional-grade risk governance framework, from the Board down — Committee Charters, Policies, Risk Appetite Statement & Delegated Authorities, Model Risk & Methodology governance, Roles & Responsibilities through to operational procedures.

Different parts of the business have different risk profiles, from Operational Risk, Technology Risk, to Credit Risks, Market Risk & Liquidity Risk for the HT Markets business. In the digital asset / DeFi world the ‘financial products’ may ultimately be similar to traditional finance, however, you have a whole range of new risks to consider as well. For example, Staking Risks include price risks, asset liquidity risks, different rewards durations & payoff models, Validator performance risks, costs, slashing, loss of assets and more…

Plus, many new channels to consider e.g. many exchanges, DAO’s (Decentralised Autonomous Organisations) and exposure to the performance of a whole host of different DeFi protocols.

On top of this, it is all running 24/7/365, the market never closes, so we need to implement significant amounts of automation in our control infrastructure.

We need to put a ‘box’ around all these parameters, in addition to traditional risk parameters, to manage our appetite for exposure and ensure we only execute through channels & products which have gone through our internal process to be approved as part of our Risk Appetite Framework.

5. How do you see risk management in traditional finance vs digital assets and the DeFi ecosystem? What are the main similarities and differences?

In terms of differences, there are a few more moving parts than traditional finance and you need to develop new solutions for how to manage/mitigate some of the new risks (outlined in the question above). However, the principles remain the same, Risk Management is about understanding risks, then actively managing to mitigate those risks in a prudent manner and enable the business to achieve its strategic objectives. A smoothly running risk governance framework can deliver a competitive advantage for the business to transact more efficiently than the competition.

As for similarities, there are many, primarily once you have your Risk Management Operating Model in place, it’s a lot about data to inform decisions. Price data from many exchanges, data from on-chain activity, data on DeFi protocol performance, monitoring various protocol governance triggers, searching for stress indicators… there’s already an enormous amount of data to consume, analyse and monitor in this space and it’s going to grow exponentially.

Effective communication within the team and organisation is of course always a given but arguably becomes even more important with more moving parts.

6. You’ve had a very distinguished career in banking, tell us about some of the interesting projects you’ve worked on.

Well, it has certainly been an interesting journey, very educational! Much of my career has been driving the ‘run-the-bank’ side, as opposed to project teams, but to be honest, you are continually working on projects to improve processes around you.

Interesting activities include:

  • Front Office Risk — model validation & development, across new to market products
  • Valuation Risk — model governance & control, institution of blind model validations into the Valuation Risk Group & governance of significant unobservable parameters.
  • Market Risk Analysis — whilst leading the market risk production team for a large bank out of London, I was tasked with delivering VaR Explain for the bank… Especially during 2008 & 2009 it was essential to be able to ‘paint the picture’ & communicate the risk drivers, at the intersection of the bank’s global portfolio, market parameters & related macro-economic drivers…
  • Group Market Risk — at a younger highly rated & rapidly growing bank I had the opportunity to fully develop a complete Market Risk roadmap and to build out the Global Markets risk function to support a rapidly growing business. I led the design of a highly effective Risk Appetite Framework to really enable the business and had overall responsibility for the Wholesale Global Markets Risk function across all locations, covering all risks for the business, Market Risk, Credit Risks, Liquidity & Operational risk. It was a great structure and we had a great team, many banks have these risks siloed and managed by separate teams.
  • Robotic Application Development — with TSS I had the opportunity to work more on the application development side. We employed an innovative & patented zero code application development platform, to develop various Risk Management applications for clients including an IFRS9 App, Surveillance Apps / Transaction Monitoring, Automated Matching Algorithms, Data Integration Apps & more.

7. Finally, tell us something interesting which you do outside of work, and which not many people know about you.

As a result of seeing the damage caused by asset price inflation in the first decade of this century, I wanted to make a contribution to the discussion on the drivers of wealth inequality.

So, I have a half-completed book sitting on the ‘shelf’ and I’m keeping my eye out in the digital asset & DeFi world for the final chapters. The working title is:

A Capital Mistake The Real Story of Wealth Inequality & Time Poverty

The book aims to elevate the mechanics of the legacy Monetary System and traditional Banking & Finance to the discussion on Wealth Inequality. It explores how these systems have combined to create a perfect storm on Capitalism, sacrificing the aspirations of the young and living standards of the salaried and wage class on the altar of “Fool’s Capital”.

On top of this, I’m fortunate to have four amazing children and a wonderful wife. At weekends we often take the girls horse riding and for lockdown, we enjoyed the evenings with our Chessboard and a bottle of red!

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