A chief risk officer can never rest on his or her laurels,especially one heading up risk management at Munich-based AllianzGroup, the international financial services firm with more than$100 billion in annual revenue that provides products and solutionsin insurance, asset management and banking.

Thomas Wilson is the fluent economist who runs the global riskfunction at Allianz and is responsible for day-to-day management oflimits and controlling of all risk positions. Given the topsy-turvyglobal economy over the past five years, it's a full-time job.

“If you had asked me in 2007 about backing long-dated Italianbonds, I would have said it's a safe bet,” Wilson says. “Todaythat's not true, of course.”

Wilson, who has a Ph.D. in economics from Stanford University,is considered by his peers to be one of the best risk managers inthe profession. In June, at the first-ever joint meeting of the CROCouncil and the CRO Forum, the associations of European and U.S.insurance industry CROs, respectively, when Wilson spoke, often toexpress a contrarian stance, heads nodded in seeming unison. AsAllianz CFO Oliver Bäte says of his colleague, “Under Tom'sleadership, our risk teams, both central and locally based, aredoing a great job safeguarding Allianz.”

Wilson joined Allianz in 2008, not the most opportune timeto wrestle with risk. He managed the response to the bursting ofthe credit bubble the prior year, as well as the financial crisisthat followed. He helped set up contingency teams on counterpartyrisk to push legal notification out in case of default and workedwith the investment management function to develop reasonable plansthat balanced risk and reward. Wilson also worked to mitigate andreduce the company's exposure to potentially affected assetclasses, an effort, he says, that “has never really ended,”pointing to the ongoing European sovereign debt crisis.

Fortunately, when the financial crisis broke,Allianz, traditionally a conservative institution, had less than$400 million worth of collateralized debt obligations (CDOs) andwas relatively well positioned on the cash side of the balancesheet.

“We've always been conservative with regard to solvency andsolvency ratios, which clearly supported us in the flight toquality financial institutions,” Wilson says. “Of course, as aninsurance company, we were brushed with the same tar as the bankingindustry, but less so because of our recognized conservativeprofile and [manageable] property and casualty exposure.”

Wilson is most proud, he says, of “professionalizing” the riskmanagement organization at Allianz. “When I came here, we werestill working up spreadsheet solutions,” he says. “We have for thepast four or five years migrated to and enhanced our internalmodels to meet the future Solvency II requirements, but also tomake sure we had robust controls and efficient reporting.”

CFO Bäte likes what he's seen so far. “We have fared well duringthe crises to date, and we've maintained a resilient capitalposition,” he says.

Wilson has assembled risk models that are designed to controlthe 95% of risks that can be more or less assessed and mitigated atpresent, freeing him up to focus on the remaining 5%. “That's wheremy framework may prove to be inadequate—a model failure due to theinability to keep up with the market,” he says.

For those elements, Wilson adds, “I need to be a riskmanager.”