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In Margin Call (2011), Eric Dale is portrayed as a very competent quantitative analyst (and engineer "by trade") with 20-years experience in the firm. He seems to have come up with his own novel predictive model for the volatility of the firm's asset prices. And his model seems to outperform the existing ones--that's how the firm starts realizing what's going on, the night after his dismissal. (Maybe he should publish that model in a peer-reviewed journal, after losing his job!)

But even without considering his above-average competence, as he himself says: "Head of risk management does not seem the natural place to start cutting jobs."

So why did they do it to him in the first round of dismissals?

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Head of risk management does not seem the natural place to start cutting jobs.

Risk management is a cost center rather than a profit center. That is, it doesn't make the company any money in the present, even though arguably it keeps the company from loosing money in the future. Depending on the culture of the company they may be regarded as just so much dead weight imposed by government regulation.

To draw an exaggerated picture, the more cowboy-ish traders, who until just before the start of the movie had been making money hand over fist for the company, hate risk management. That's because they sometimes kill totally awesome trades that would generate huge bonuses. They can do their own risk management, thank you very much. In a company dominated by aggressive traders, risk management would be viewed as a natural place to cut in a downturn.

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  • Are you sure it is even legal to fire a Head of Risk?
    – Rodrigo de Azevedo
    Dec 15, 2022 at 1:25
  • @RodrigodeAzevedo certainly a bank can fire a head of risk. There may be regulations that require a bank to have a head of risk (I don’t know), but they certainly don’t have to have a particular person in that position. Famously, Lehman Brothers fired their risk manager, Madelyn Antocic, in 2007, just before the financial crisis portrayed in movie became obvious.
    – Charles E. Grant
    Dec 16, 2022 at 2:42
  • But is the firing done overnight, without having a replacement ready?
    – Rodrigo de Azevedo
    Dec 16, 2022 at 10:08
  • @RodrigodeAzevedo we're getting a bit far afield from the movie, but yes, in the case of Antocic the firing was essentially overnight, and the duties of Chief Risk Officer were simply picked up by the CFO.
    – Charles E. Grant
    Dec 16, 2022 at 18:28

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