The role of the modern Chief Risk Officer (CRO) has moved beyond a technical function into one that requires all manner of skills and capabilities. Apart from academic credentials in finance and risk, which are extremely important, any CRO should have the ability to measure and compare risk, communicate risk issues to the board, technical risk management, influence board on risk strategy, and experience in managing operations. Other skills may include critical thinking, problem-solving skills, excellent communication skills, i.e., written or oral analytical and mathematical skills, good organizational skills and attention to detail.
While the risk team pioneers the company’s entire risk management program to promote long-term financial health, the investment team is responsible for the successful management of investments and other pools of capital. The audit team, in turn, works to ensure compliance and accuracy of the information presented by the risk and investment team to reduce the potential for fraudulent financial reporting. The CFO-CRO relationship is necessary for the promotion of a more effective and integrated approach to risk management. The ideal working relationship between the two is one that promotes and boosts the risk-finance working relationship. The two work together to achieve better risk-adjusted returns which move the company from high-risk businesses to the deployment of resources to areas that stand a better chance of sustained profitability.
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The CRO role is mainly a directing role that involves evaluating of potential risks of a company and coming up with strategies to mitigate the risks. CRO’S primarily direct the firm towards risk-free operations that promote sustainability and profitability. The size of a firm, however, defines the scope of the CRO’s role; large companies present more risks compared to smaller companies as their capital pools are more. This means that more risk management work is required form CRO’s where the firm is large. The relevant indicators to evaluate the performance of a CRO include the development and implementation of risk management policies, strategy and implementation plan, the maturity of risk management, Institution participation in risk management, the absence of surprises and the quality and timeliness of risk intelligence.
