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Innovation, Risk, Ethics
Initiative Weaves Study of the Three Together
For Sharath M. Sury, the turbulence in the financial markets over the past two years has created a “perfect storm”: a condition that almost demands the establishment of an organization that looks at financial innovation and risk management from an ethical point of view.
Sury, the Dean’s Executive Professor in the Finance Department, is acting on that belief to take the lead in launching the Sury Initiative for Financial Innovation and Risk Management (SIFIRM). By involving academics, students, and representatives of the private sector, it aims to become a magnet for innovative thinking in these areas.
“Wall Street isn’t what it used to be,” Sury says. “The case for applied studies that combine ethics, social justice and innovation is compelling, and students and companies have latched on to it in a very big way.”
Coming into academia from the private sector (he was CEO of S4 Capital, the top-ranked wealth manager in the U.S. in 2006 and 2007), Sury has the connections to get the initiative off to a fast start and has provided much of the seed money for its inception.
The Sury Initiative will sponsor a conference in the spring of 2010 that will focus on social investing. “The theme will be the value of values in the investment world,” Sury says. The steering committee is planning a more formal event later next year that will serve as a forum for top practitioners and also help raise funds for SIFIRM.
As the SIFIRM grows, Sury hopes it will generate a portfolio of work that will advance knowledge in the public domain on the subject of ethical innovation and risk management, expose Santa Clara students and financial firms to each other, and provide an umbrella for grants leading to specific research in these fields. Already the Sury Initiative is on the verge of engaging in a joint venture with a well-known European financial firm to study effects of the Basel II accords regulating international banking capital requirements and the adoption of International Financial Reporting Standards by U.S. companies.
For now, much of Sury’s work with SIFIRM is organizational, primarily lining up a board and getting students interested. Things are going well in both areas.
“Our biggest strength so far is our board,” he says. “Everybody on it has been hand-picked, and it’s a board designed for active participation and for its unique experience and insights which aren’t purely theoretical. This will be a board we can rely on for its opinions, guidance and direction.”
Two of the board members are Nobel laureates in economics: Harry Markowitz, founder of modern portfolio theory, and Robert Merton, honored for his theory on options pricing. SCU professors Meir Statman and Hersh Shefrin will bring to the board a background in behavioral finance as internationally recognized pioneers in that field.
When he put out a query earlier this year to students at Leavey, more than 100 students said they would be eager to volunteer “in any capacity” to be involved in the Initiative. Among graduate students, many of whom are already in professional positions, the rate of student interest was a strikingly high 70 percent. The student interest coupled with an active, blue-chip board, Sury says, has put SIFIRM on a strong footing at the beginning.
“I’ve been a student of risk all my life, and my own firms have had a focus on risk management throughout. You might say it’s in my DNA,” he says. “I feel that this Initiative can help find the silver lining in the financial cloud of the last two years, and because of Santa Clara’s strong commitment to values and educating the whole person in the Jesuit tradition, it made sense to house it here. When it comes to financial innovation, having a moral compass or the ethical grounding that a Jesuit education provides is a real benefit. It can lead you away from the excesses of runaway capitalism.”