It’s been widely reported that JPMorgan Chase and Goldman Sachs managed risk better than the average bear during the financial crisis.

How did these two institutions accomplish this feat as their industry peers got crushed?

Answers to this question frequently crop up in current discussions about the evolution of enterprise risk management (ERM) practices.

Laura Taylor, Aon’s global leader of ERM, and I spoke about this very topic in a wide-ranging discussion on ERM’s evolution last month. Among other qualities, she pointed to Goldman’s treatment of its chief risk officer position: The executives who fill that role rotate up from the trade floor, a progression that gives the chief risk officer deep knowledge of the company’s risk profile and, perhaps equally important, credability when making decisions that affect the firm’s rainmakers.

A new, must-read report from The Economist also identifies the company’s culture and organizational structure as a major risk-management advantage:

“The firm promotes senior traders to risk positions, making clear that such moves are a potential stepping-stone to the top. Traders are encouraged to nurture the risk manager in them: Gary Cohn, the firm’s president, rose to the top largely because of his skill at hedging “tail” risks. Crucially, Goldman generally does not fire its risk managers after a crisis, allowing them to learn from the experience. Yet despite everything, it still needed government help to survive.”

“By contrast,” the article continues, “UBS’s risk culture was awful.” But it’s improving, thanks to (among other changes) a new rule that the firm’s chief risk officer cannot be overruled by the firm’s chief executive when the CRO rejects a transaction due to risk concerns.

The lesson from JPMorgan? Well, it turns out that tone at the top is pretty important after all. The Economist describes Jamie Dimon as a “voracious reader of internal reports” who discourages slide presentations and encourages more intimate and “informal discussions of what is wrong, or could go wrong” in response to his tough questions.

I also believe that Dimon’s treatment of government relations as a “seventh line of business” also helped after the crisis erupted and the regulatory response began to take shape.

We all well know the economic and financial toll this crisis exacted and continues to exact. It’s encouraging to discover that many of us are extracting something of value from the crisis as well. ###