The chief risk officer (CRO) is the corporate executive tasked with assessing and mitigating significant competitive, regulatory and technological threats to an enterprise's capital and earnings. The position is sometimes called chief risk management officer or simply risk management officer.
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Organizations have long been concerned with business risks that can threaten productivity and profitability. The formalization of those efforts in the form of enterprise risk management (ERM) led by a dedicated CRO gained momentum in the wake of regulatory requirements such as the Sarbanes-Oxley Act of 2002. Concerns fueled by legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 have made the CRO position even more important in the C-level hierarchy.
In addition to issues of compliance, CROs are typically concerned with issues such as insurance, IT security, financial auditing, internal auditing, global business variables, fraud prevention and other internal corporate investigations.
Most large businesses and organizations considered "critical infrastructure," such as financial institutions and energy providers, now support an ERM program led by a CRO or equivalent.
The CRO is also responsible for implementing operational risk management and mitigation processes to avoid losses stemming from inadequate or failed procedures, systems or policies. Operational risk management includes business continuity/disaster recovery planning, the development of information security processes and providing input on governing regulatory compliance data.
CRO roles and responsibilities
The chief risk officer's responsibilities will vary depending on the size of the organization and industry. Generally, the CRO is responsible for the company's risk management operations, including overseeing the company's risk identification and mitigation activities.
As information technology has become integral to business processes, the associated risks from hackers or data breaches have increased the breadth of the CRO's responsibilities. Information protection strategies and risk assurance efforts have become a key part of the CRO's job, as well as the ability to identify system vulnerabilities and potential threats to the company's data networks. Other CRO responsibilities include:
- Develop risk maps and strategic action plans to mitigate the company's primary threats, and monitor the progress of risk mitigation efforts.
- Develop and disseminate risk analysis and progress reports to company executives, board members and employees.
- Integrate risk management priorities into the company's overall strategic planning.
- Develop and implement information and risk assurance strategies to protect against and manage risk related to the use, storage and transmission of data and information systems.
- Evaluate potential operational risk stemming from employee errors or system failures that could disrupt business processes, then develop strategies to both reduce exposure to these risks and adequately respond when these issues occur.
- Determine the company's risk appetite and quantify the amount of risk the company should take on.
- Oversee funding and budgeting of risk management and mitigation projects.
- Communicate with company stakeholders and board members about the business' risk profile and assessments.
The CRO might also be required to conduct due diligence and risk assurance on the behalf of the company during business deals, mergers and acquisitions. For example, the CRO could be responsible for investigating the potential risks surrounding a company that is being targeted for acquisition, and to determine the reliability of the targeted companies' risk management processes.
CRO job requirements
The chief risk officer's job description and qualifications will also vary depending on the industry and size of the organization. For example, a CRO for a banking firm will require knowledge of and experience with financial compliance requirements, fraud prevention and potential threats to monetary transactions.
The typical enterprise CRO has a post-graduate degree in business administration (or equivalent business experience) and at least a decade of progressively responsible experience for a major company or division of a large corporation. Because online risk mitigation has become so vital to corporate success for digitized companies, it will also help to have knowledge of the corporate technology systems and networks.
Strong communication skills are also necessary to demonstrate to company stakeholders the need for strategic efforts that reduce the company's risk exposure. As a result, the ideal CRO candidate will have previous experience working closely with executive teams, conducting internal audits and reporting to a board.