What is a chief risk officer? Chief risk officers (CROs) are responsible for assessing and mitigating significant challenges associated with competition, regulations, and digital developments. In essence, they manage risks.
What is a Chief risk officer?
CROs report to the board and the CEO on various issues, including insurance, IT security, financial audits, internal audits, global business variables, fraud prevention, and other internal corporate matters.
The CRO must implement operational risk management and mitigation processes to prevent losses caused by insufficient or failed procedures, systems or policies.
The operational risk management process includes disaster recovery and business continuity planning, developing information security policies and managing regulatory compliance data.
There are four broad risk categories
CROs typically focus on the following four broad risk categories:
- Compliance risk is related to an organisation’s ability to identify and meet its responsibilities under laws, rules, and regulations.
- Risks relating to operations, including business interruptions, labour issues, technology problems, and vendor turnover.
- The risk of reputational damage, which can harm an organisation’s reputation, recognition, standing, and value with its employees, shareholders, customers, and the general public; and
- Strategic risk entails any risk that may impact an organisation’s ability to execute its strategy.
CRO roles and responsibilities
In general, the CRO oversees a company’s risk management efforts, including risk identification and mitigation. One of the biggest current concerns for CROs is cybersecurity.
Information technology poses risks because it is essential to business processes. Increasingly, CROs are involved in evaluating and mitigating the risks posed by hackers and data breaches. As a critical part of the CRO’s job, the information protection strategy and risk assurance efforts have evolved, as have the abilities for identifying vulnerabilities and threats to a company’s data.
Other CRO responsibilities include:
- Mitigating the company’s primary threats by developing risk maps and strategic action plans;
- Keeping track of risk mitigation efforts;
- Producing and distributing risk analyses and progress reports to company executives, board members and employees;
- Including strategic risk management priorities in the company’s overall strategic plan;
- Planning and executing information assurance strategies to protect against and manage risks associated with the use, storage and transmission of data and information;
- Assessing how errors made by employees or system failures might disrupt business processes, then developing strategies to minimise exposure to those risks;
- Identifying and quantifying the amount of risk that the company should be taking – this is known as risk appetite;
- Budgeting and overseeing risk management and mitigation projects;
- Keeping stakeholders and board members informed about the business’s risk profile and assessments.
Furthermore, CROs may conduct due diligence and risk assessments on behalf of the company during a merger or acquisition. For example, a CRO may examine the risks surrounding a potential acquisition target and assess whether its risk management frameworks and processes are reliable.
Responsibilities vary by sector
The chief risk officer’s responsibilities and qualifications vary by sector and organisation size. The CRO of a bank, for example, should be familiar with financial compliance requirements, fraud prevention, and potential threats to monetary transactions.
The CRO job is an executive role requiring advanced education, extensive experience, and proven business, management, and interpersonal skills.
In most cases, CROs have postgraduate education, often a master’s degree in business administration. Generally, they have spent many years working in accounting, economics, legal, or actuarial fields and will have training in risk management.
Since cybersecurity and online risk mitigation have become crucial for corporate success, some CROs have also worked in the IT or cybersecurity industries.
Typical CROs come from backgrounds that include auditing, accounting, financial analysis, loss prevention, operations management, risk management, and security analysis.
As well as having experience working with executives, conducting internal audits, and reporting to a board, the ideal CRO candidate will be experienced in managing change.
For a CRO to effectively identify and assess risks and develop mitigation strategies to reduce those risks, they should possess the following skills:
- Skills in quantitative and analytical calculations;
- Knowledge of finance and accounting to understand how various risks impact the company’s budget and revenue;
- The ability to collaborate with, influence, and educate employees and fellow executives about risk-related matters;
- An understanding of systems, networks, IT infrastructure and cyber threats related to digital and corporate technology;
- Communication skills are vital for conveying complex concepts to audiences of varying degrees of expertise and advocating for efforts to reduce the organisation’s risk exposure.
Why is a CRO needed?
Almost all organisations face threats and risks that harm their operations and stakeholders. Risks may even threaten the life of the organisation. Risks are also constantly evolving and getting more complex. This is especially true for large, global or publicly traded companies. A CRO with education and experience in identifying, assessing, and mitigating such risks is essential for these organisations.
Who does the chief risk officer report to?
The chief risk officer reports to the CEO and board of directors.