Q&A: GMAC’s New Credit Risk Chief Outlines His Priorities

Few financial services companies in the United States have had to endure as daunting a year as GMAC Financial Services. With a heavy involvement in the mortgage sector, it was forced to lay off a large portion of its staff in February 2008, and to change its management team the following month.

As a result of these changes, the company’s focus turned to its risk management practices, as demonstrated by the hugely significant hiring of Brian Gunn as its new chief credit risk officer last month has great significance.

Gunn joined GMAC, which he called a “fantastic opportunity,” from General Electric Co., where he was chief risk officer of its GE Money Canada unit. Gunn is still settling in at GMAC – he was still working on moving his family, including a newborn, to Detroit from Toronto when Auto Finance News spoke with him in late June. Gunn talked about his goals at GMAC, which operates in more than 40 countries, and the lessons he learned at GE Money.

Auto Finance News: Brian, what’s your background?
Brian Gunn: I was at GE for 10 years. After grad school, I joined their risk training program. I worked on the company’s old, private-label credit card business. Within five years, I was promoted to the executive level. It was a fast track. This was by age 30.

In my last two roles at GE, prior to Canada, I was running policy and growth for the Americas division. The best analogy I can give you for that is we had ownership of risk. The division spanned regions, and we set policies and processes. We tracked the entire credit lifecycle across products and regions. … We were part of the deal-approval process. We did due diligence for risk. If we were purchasing a credit card portfolio or banks … we would be involved in pricing and contract negotiations. [Our other tasks involved] talking to the Street regarding securitizations, credit policy, compliance, and reserve setting.

I was in the policy and growth group for three years. About two and a half years ago, there were opportunities globally; for personal reasons, I couldn’t do it. But there was this Canadian opportunity. In 2006, we bought the private-label credit card business of Hudson’s Bay Co., the oldest retailer in Canada. The job was to build its infrastructure, install the GE way, because [Hudson Bay’s financial services business] was kind of a startup. The small monoline credit card company program came to include mortgages, secured lending, such as motorcycle, ATVs, and RVs.

AFN: Describe your experience in Canada.
BG: To be part of a startup and put a stamp on that business was phenomenal. I was building all the risk processes. Bringing in the power of analytics to maintain your risk controls was phenomenal. We more than quadrupled the size of the business by the time I left. But it was controlled growth.

AFN: What did that teach you about managing risk?
BG: If you have the risk principles in place, there is no reason why [growth] doesn’t work.

AFN: Why did you choose to join GMAC?
BG: It is a fantastic opportunity. I am thrilled to be here and be part of the team. Everyone has embraced risk management. I absolutely bought in to what the company is doing. When I looked at the whole relationship [between the company and its risk management], at how the relationship is structured, I saw a lot of similarities to what I was doing at GE. Frankly, I was ready for the next challenge.

AFN: What do you make of the risk situation in auto finance today and in the financial services sector in general?
BG: It is an environment that is one of challenge. This is a time that risk managers can rise to the occasion. This is not something that you look for, but this is a time that risk can show its value. Anyone can have no losses; you just wouldn’t have any sales.

AFN: Where do you see the most opportunity to improve risk management at GMAC?
BG: Risk analytics … that is what I am excited about it. We can bring in the analytics to show the value of risk.

AFN: What are your first priorities?
BG: From a risk perspective, I grew up in a certain culture. The first thing I am doing is [trying to] understand the challenges [GMAC is] facing and how to get engaged. I want to show the value to the organization that risk can bring to the table.

AFN: What’s your approach?
BG: I am still learning GMAC’s ways. One thing I can see is that they have embraced risk. You need to make sure you have the proper controls in place around the world. Second thing, when you think about North America and the challenges the industry is facing, you have to roll up your sleeves and figure out what is going on. At the end of the day, we are here to grow the business from a healthy perspective. How do you … identify the good ways to grow the business? That is all analytics, optimizing portfolio segmentation.

AFN: What’s your personal perspective on the risks facing the industry today?
BG: My personal opinion is that I am optimistic about the U.S. consumer, cautiously optimistic. … You have to be diligent through this process, stay very close to portfolio, understand the environment you are in. We are definitely going through a cycle, but I am cautiously optimistic.

—JJ Hornblass