Implementing Enterprise Risk Management

CHAPTER 11Rise of the CRO

INTRODUCTION

The 2008 financial crisis and subsequent scrutiny of corporate governance have put chief risk officers in the spotlight. I was interviewed by the Wall Street Journal for an article¹ aptly titled “Cinderella Moment: The Credit Crisis Means Chief Risk Officers Are Finally Being Listened To. But How Long Will It Last?” The article discussed the rise of CROs, their organizational prominence, and the abundant resources that they were receiving. It also discussed their key challenges in shaping corporate culture and establishing objective performance feedback loops. CROs have come a long way but they must demonstrate that they can add value as a member of the executive team.

In the past, CROs came mainly from risk management backgrounds, such as market risk, credit risk, corporate compliance, and internal audit. Reaching the CRO position was seen as the capstone for a risk management career. Today, many CROs come from business backgrounds and bring a much broader perspective to their jobs (i.e., they see the whole bell curve and not just the downside). Instead of a capstone, CRO positions can now be steppingstones toward the corner office and even the boardroom. Matt Feldman, whose profile is featured later in the chapter, represents this new class of CROs.²

Once only discussed in a financial industry context, chief risk officers are expanding into other highly regulated industries such as pharmaceuticals, energy, and insurance. But with greater ...