David Fox might cringe if you said it in front of him. In fact, he might even get a little testy if you said it at all. But give this man credit, for he's got soul.
The Houston native and director of risk management for the Houston-based international engineering firm KBR Inc. says his latest career move came about, not so much from a specific opportunity or recruitment effort, but from what happened inside his cranium and chest cavity as he sat in his North Carolina living room two years ago and watched the citizens of his hometown open their arms, homes, churches and civic centers to the refugees of Hurricane Katrina.
"I was thinking to myself that that was extraordinary. That was the way I remembered my home city, and it was time to go home," says Fox, who at the time was a managing director of Leyendecker & Associates, a Raleigh, N.C.-based executive search firm in the risk management and corporate finance fields.
Fox is a long-time friend of Cedric Burgher, KBR's chief financial officer. After Fox got his long-distance eyeful of what was happening in Houston after Katrina, the two "started talking."
Fast-forward two years, and Fox finds himself managing enterprise risk for KBR Inc., a company that was just spun out from its parent, Halliburton Inc., in November 2006. The divorce of the two companies' insurance programs wasn't final until last April.
KBR has more than 56,000 employees around the globe that are working in civil engineering, the volatile energies markets, government work and commercial construction. Each field has its own barrelful of risk.
Although that conglomeration might make anyone quiver in their boots, Fox says he's eager to implement enterprise risk management at KBR.
So far, he says he likes what he sees.
"I would say that we are succeeding. We are constantly asking people to take on broader assignments, and when you get people working together with a level of transparency and openness and financial discipline in group dynamics, you do take the organization to another place," says Fox.
And what is that other place?
In a world that sometimes seems dominated by mouse clicks, statistics, analysis, pie charts and the other black-and-white marching penguins of the left side of the brain, Fox says he wants to take KBR to the right side of the brain, to the font of music, painting and poetry; to the land of intuition.
It's not easily done in a corporate environment.
"By its nature, enterprise risk management is two steps forward, one step back," says Fox. "By its nature, there is usually resistance because it really requires a lot of right-brain thinking, if you will. And the inclination might be to take the subject and bolt it onto an existing meeting, and all of a sudden, you ask them to shift gears and start thinking about multiyear views and events that are really quite complex."
As he stands at the helm of KBR's risk management efforts, which he freely admits are a major challenge, Fox has at his back a wind that is formed by his professional experiences. In those experiences, Fox picked up the financial education, the international experience and the exercises in group creative thinking--and stark group failure--that he is now putting into play at KBR.
FROM HIGHS TO THE LOWEST
During his undergraduate years at the University of Texas, Fox had the opportunity to meet some of the architects of Houston's physical expansion. After graduating and before earning his M.B.A. at the University of North Carolina, Fox worked at the Austin, Texas-based Municipal Advisory Council of Texas.
He says the experience with the service organization for municipal-bond agencies was the reason he later pursued a job in public finance investment banking with the Houston investment firm of Underwood, Neuhaus & Co.
"I liked the idea of serving communities and seeing them built up," says Fox.
Following that, Fox sought and got his first taste of international business experience.
"For me being a young person trying to find my way in the finance field, the reason I moved from Underwood was because I wanted to take an international view of things," he explains.
Between 1989 and 1997, Fox was a vice president in the Houston office of the Industrial Bank of Japan, where he worked establishing credit relationships with Fortune 500 companies seeking financing for projects overseas.
In his nine years with IBJ, now known as the Mizuho Corporate Bank Ltd., the boy from the east side of Houston traveled to Hong Kong, England, Japan and Indonesia. And he liked it.
"There is no doubt about it. I love the complexity of international situations," says Fox.
But 1997 arrived, and electricity deregulation was unfolding across the United States. Fox, like many others in his hometown, saw an opportunity.
He also saw a way to move from the banking side to the corporate side and get an education in corporate finance. It was in his years at Houston-based Dynegy Inc. that Fox says he got his first inkling of what group creative thinking in a corporate setting feels like.
"It helped me see the pure dynamics of creativity," Fox said.
As director of corporate finance, Fox also began to see the connection between allocation of capital and risk management.
Even though he wasn't in the risk management department, Fox saw the role the treasury plays in managing risk. He learned that it's in what projects you choose to fund and which ones you limit that you engage in skilled enterprise risk management.
"He was very good at taking a step back and not overlooking the forest for the trees," said Jeffrey Nichols, an attorney and shareholder in the Houston office of Greenberg Traurig LLP.
At Dynegy, Nichols worked with Fox on teams that put together complicated energy plant deals. He said it was there that Fox got his practice taking apart the different pieces of a project and assessing the risk inherent in each.
"He would rationalize the risk so that people knew exactly what they were getting into," Nichols said.
In those days, like that more infamous Houston-based energy giant Enron, Dynegy rode a wave of emerging utilities companies and energy traders. It was a time when CFOs wowed Wall Street with heady revenue projections and the loans flowed freely.
Through mergers and acquisitions, Dynegy during Fox's tenure grew into a Fortune 50 company. But with a $75 million trading exposure to Enron, Dynegy didn't quite make it out of the whirlpool when its cross-town rival sank in 2001.
Dynegy saw its stock price implode from around $60 a share in 2001 to less than $3 a share in early 2003. Like many of his cohorts at Enron and other Houston-based energy firms, Fox soon found himself sitting on the sidelines.
BURNED INTO MEMORY
So, he'd had the education in international business, he'd had the lessons in corporate finance, he'd been in the room when the best and brightest got together and let the creative ideas flow. And he'd been there to see what it looks like when the whole thing blows up.
"The whole meltdown of merchant energy shaped me," says Fox. "It was very hard to have a front-row seat at the total meltdown of an industry and not be shaped by what happened, not to have a very keen sense of risk looks like."
At KBR, Fox sits on the same executive council with Burgher, a former vice president of investor relations with Enron, and others who got burned when merchant energy in Texas caught fire.
"It has been profound as to how it has shaped our view of risk, and so there is a tenacity about it that may not have been there otherwise," Fox says.
And what did that most painful lesson about risk management teach Fox?
It taught him that you don't shoot the messenger. You encourage your company's managers to engage in open discussions that allow for differences of opinion.
You avoid the kind of groupthink that led Enron, and to a lesser degree Dynegy, into the merciless fan blades.
From his new perspective, Fox sees the present and future of enterprise risk management as being one that focuses on the upside, not the negative what-ifs.
"The way it was thought of before, enterprise risk management was about downside ... surprises happen. ... Now there is a lot more talk about insuring that you are able to capture reward for the risk that you are taking," he says.
And the best way to capture that reward, Fox believes, is to manage the human culture, bring together the minds that the organization is counting on, and let them work together, free of fear, to produce successes and deliver results.
"Some people would say enterprise risk management is change management. At the end of the day, it's not the metrics that drive ERM, it is the socialization that drives it. It's bringing people together to discuss all the things that you are about, bringing people together to understand each other and to understand how you're going to make decisions about complex things."
It's about that community that brought Fox back to Houston in the first place.
"In my opinion there is no company anywhere that demonstrates what the fabric of this city is all about. It is about serving communities, it goes back to the beginning. That is what we do, ultimately, is service communities and serve people."
DAN REYNOLDS is senior editor of Risk & Insurance®.
November 1, 2007
Copyright 2007© LRP Publications