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The Role of the Chief Risk
Officer
The Chief Risk Officer is a position that
has become very important, especially
after the Sarbanes-Oxley Act and the Basel ii Accord. A really
good CRO will also meet the requirements of the Dodd Frank Act.
The Chief Risk Officer's job is to ensure that
the organization is
in full compliance with applicable laws and regulations. He must
coordinate the company's risk management efforts, explain risks
and controls to senior management and the board, and make
recommendations.
The Chief Risk Officer is rapidly becoming
one of the 3-5 most
important members of the management team. After the corporate
scandals, organizations have to comply with an increasing number
of laws and regulations.
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We read some
important paragraphs from a report from the Economist Intelligence
Unit Sponsored by: ACE, Cisco Systems, Deutsche Bank and IBM.
"For a corporate post with only
a decade of history, the chief risk
officer (CRO) attracts a lot of attention.
CROs
have consolidated their position
in the financial sector, where they began, and are increasingly
to be found in other industries.
As companies seek to respond to
increased regulatory pressures and a growing array of business
risks, the CRO is emerging as one of the most important
positions in the management team.
A new survey of 137
senior executives from the Economist Intelligence Unit reveals
how the CRO’s role is evolving in the light of new trends and a
broad range of emerging risks. Based on the findings of this
research, plus interviews with several practicing CROs, this
report provides insights into the main challenges and issues
facing top risk managers today.
Key findings of the research include
the following:
● CROs are growing in number and
influence. The role of CRO is well entrenched in financial
services, and will become more commonplace in other industries
over the next two years.
Forty-five percent of all
companies in the survey have already appointed a CRO, while a
further 24% will do so within two years’ time.
Only 31%
of companies have no plans to appoint a CRO, and even here, the
concept of integrated risk management at a high level of
seniority is broadly embraced.
The survey also
indicates that the new risk overseers wield significant power.
They play a critical role in enabling the business to make sound
investment decisions and in enforcing better standards of
governance, and most of them report directly to the board or the
CEO.
● Regulatory compliance is the top priority for risk
management.
Regulatory risk ranks as one of the top two
threats to global business, say risk managers in our survey, and
regulatory compliance is the CRO’s primary responsibility
according to the majority of executives.
The importance
of assuring business continuity also figures prominently, but is
seen as declining sharply over time—particularly in the
financial sector where alternative sites and redundant systems
will increasingly offer a realistic solution.
Monitoring
emerging risks and extending risk principles into wider business
strategy are seen as more important tasks for the future.
● The best CROs bring a “big picture” perspective. The key
benefit of having a CRO, according to 52% of executives in the
survey, is their ability to expand risk management to encompass
a broader range of risk issues.
However it is unlikely,
and possibly not even desirable, to find a CRO that has
expertise in
everything from financial risk management to IT
network issues or the specific risks pertaining to different
markets.
The best CROs tend to have a broad business
background, combined with the communication skills required to
influence both the board and the managers and employees
responsible for making day-to-day decisions
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