Risk is changing. The financial crisis has led to a far greater focus on regulatory and governance issues in the financial services industry. It has also completely altered the agenda of the risk function.
In the recent past, risk was a hidden function. Often viewed as a necessary evil, it was seen as so arcane that few people really understood it. CROs tended to be viewed as taking charge of a ‘defensive’ discipline, not actively engaged in the organisation at a strategic level. More than anything else, risk was there to distil and pass on technical information.
The financial crisis has changed all this: in the new, pressured financial environment, chief risk officers have had to re-invent and re-define themselves as far more strategic, value-creating entities. Now, CROs are required to provide far more genuine commercial guidance, rather than simply distilling and passing on technical information, as they tended to in the past.
We recently surveyed 30 leading CROs and the preliminary results paint a very clear picture of a role and function in rapid transition, particularly at the CRO level,
where risk professionals now have a clear and compelling mandate to contribute at to board level. Formerly reporting into CFOs, CROs now have their own spot at the board table, and most often report directly into the CEO as a trusted advisor and a ‘right hand man or woman.
CROs are not only providing critical decision making information, they are also taking a strong lead in making the strategic decisions.
This shift has itself created a demand for a new type of risk talent. Now, banks want a more savvy, commercial professional who has heavy involvement in strategic development and direction of the organisation and its risk appetite
products and pricing.
Our study showed that 50% of CROs now help guide the CEO in setting the organisational strategy. 10% are actively involved in the strategy process and risk input. In the remaining 40% of cases, CEOs continue to drive strategy without involving senior risk professionals. It is our conclusion that these organisations will be swept up in the tide soon enough.
Fundamentally, it’s an exciting time to be a senior risk professional. You now have more opportunity at strategic level than ever before. CROs can lead organisations from the front, and ensure that risk appetite, and the way that companies manage and deal with risk, have a genuine strategic impact.
By Raj Tulsiani, CEO at Green Park Interim & Executive Search. Green Park is a specialist provider of executive recruitment services spanning executive search, interim management and board services.