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Enter Le Professeur

Don't look at just risks. Companies reach out to academics for risk portfolio management

By Richard Gamble | Updated on May 01, 2004

On most days, Simon Lalancette finds himself in a classroom, spinning war stories for his MBA students at the Ecole des Hautes Etudes Commerciales (HEC) in Montr?al about his work for utility giant Hydro-Qu?bec. His assignment: to infuse a little academic theory into practical risk management and organize a financial engineering staff within the corporate treasury of one of North America’s largest generators of electricity.

No doubt, Lalancette’s work there–which started in 1998–was a far cry from the more contemplative world of academe. But for Hydro-Qu?bec, the simple incursion of one professor of finance has transformed the company’s risk management from a basket of scary weaknesses to be guarded against with hedges into a portfolio that is managed in a rigorously quantitative way by between two and four financial engineers. “There is diversification value in a risk portfolio, as surely as there is diversification value in a portfolio of stocks,” observes Lalancette, who still works one day a week for Hydro. And it was his job to teach Hydro-Qu?bec’s treasury professionals how to determine it and then make it work to their advantage.

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