THE EVOLVING ROLE OF THE CHIEF RISK OFFICER

Over the last decade, awareness of risk management has been increasing at an exponential rate. A number of black swan events – including the financial crisis, sweeping regulatory changes and environmental catastrophes – have all brought risk management into strong focus.

Best practice dictates that risk management should be a consideration for all employees up and down the corporate structure; however, there are many different theories surrounding the best way to manage risk and there is certainly no catch-all solution as it pertains to risk management. However, one of the best ways to ensure that organisations are sufficiently insulated from the potential pitfalls of risk is by establishing a well rounded, top-down risk management agenda. Those senior executives that make up the C-suite should form the vanguard of the businesses’ approach to risk. By helping to set an example for the rest of the firm with their attitude to risk management, senior executives can play a crucial role. Moreover, by instigating a strong top-down enterprise risk management (ERM) strategy, companies can provide the crucial leadership and guidance needed to balance risk and steer the company in the right direction. An effective ERM policy will address key risks across the business and elevate risk discussions to a strategic level.

One of the most crucial factors to be considered when establishing a top-down approach to ERM is the role of a chief risk officer (CRO). As awareness of risk and ERM strategy has spread across various industries, so too has the prevalence of the CRO.

Jan-Mar 2014 Issue

Richard Summerfield