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The Role of the Chief Risk
Officer
The Chief Risk Officer is a position that became very important
after the Sarbanes-Oxley Act, the Basel ii Accord and other pieces
of legislation.
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.
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 practising 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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