Feedback on risk team formation

I have been sounding out about the formation of a risk team where I live in Oslo, Norway. The response has been muted. The feedback so far:

Pros:

  • highly interesting, a fresh market opportunity

Cons:

  • presently low activity, not really much to base a 0800-1600 job on.
  • one customer, MakerDAO. If you are starting a company that will possibly only have one client you are setting yourself up in a serf position.
  • the uncertainties around crypto in general are so high that the risk team deliverables are anything but hard science.
  • the activity could be highly sporadic with long periods of low activity between activity peaks when highly valueable collateral types (think energy assets) are onboarded.
  • there are in other words a disparity between the expense model which are hours of work put in analysing the collateral class and the reward model which is the class debt ceiling.

Conclusion
Based on the above it is going to be hard to convince anyone to quit their day job and go into collateral evaluation for Makerdao. One thing that could be done is to change the reward model to include a small percentage cut of the stability fee for that asset class. This could potentially make it highly lucrative to form risk teams but this would again require a whole different set of mechanics at MakerDAO’s side, and might not result in increased quality.

Another solution would be to use crowdsourcing within the community to do the risk analysis. Yes - it runs the risk of being a beauty contest, but since the deliverables are so uncertain anyway I feel this might as well be way forward. Simply put the collateral parameters up for a vote and then slug it out in the forum or the chat.

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Thanks a lot for this post! Interesting and concrete points.

The “one customer” problem seems real only insofar as the skills are not reusable. If the abilities that make you a good risk team also mean you are in high demand elsewhere, MakerDAO is effectively competing with many for those skills.

Also, does a consulting model sound viable? As in: find people who already exercise the skills necessary to do risk analysis in the normal course of their professional life. Offer them one-time, scoped engagements whenever necessary (new collateral, periodic reevaluation).

The consulting model? Yes that could in some cases be workable. The problem is that we could need multiple consultants to run the same evaluation in order to check them against each other. I admit that this is a hard problem.

Yeah these are great points. Of course it would be tough to sustain a full time job or start up a company based on this (although not entirely infeasible?). This is a big reason why the Foundation is trying to offer grants for specific risk work until there’s enough “work flow” to self-sustain some risk teams. I think within a short few months there could easily be enough work to go around.

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