The biggest concern for most organizations is associated with business risks that threaten the company's profitability and productivity. For example, businesses and organizations classified as "critical infrastructure," like energy providers and financial institutions, have implemented enterprise risk management programs led by a chief risk officer.
The chief risk officer (CRO) helps to ensure that the organization complies with the rules set by the government, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The position of a chief risk officer is constantly evolving, and as companies adopt new technology, the CRO must guard intellectual property, govern information security, and protect against fraud.
What Does a Chief Risk Officer Do?
A chief risk officer also referred to as a chief risk management officer (CRMO), is a C-level executive responsible for managing the company's risks. The CRO is tasked with looking out for various risks, which can be categorized into four groups:
- Strategic risk, surrounds anything that may hinder the organization's ability to implement a strategy;
- Reputational risk, or any element that can harm the company's brand image value and recognition among its employees, shareholders, sponsors, and the public
- Compliance risk, which involves the company's mechanisms for identifying and meeting its responsibilities under the rules, regulations, and the laws that apply to it
- Operational risk, includes technical problems, vendor turnover, labor issues, or business interruptions that could impact the organization's ability to transact business
A chief risk officer reports to the company's chief executive officer (CEO) or the board of directors. The day-to-day duties of a CRO include determining and assessing a company's risk tolerance, generating risk management initiatives, and creating strategic plans to mitigate risks, then distributing the findings to the executives, shareholders, and employees.
Other responsibilities of the chief risk management officer include;
- Keeping track on the progress of risk mitigation efforts,
- Developing strategic action plans and risk maps to lower the company's primary threat,
- Incorporating strategic risk management priorities into the company's strategic plans,
- Establishing the company's risk appetite,
- Supervising the budgeting and funding of mitigation projects and risk management,
- Communicating with the executives and stakeholders about the business risk assessment and profile.
Since the organization's operating environment is constantly changing, the CRO must be proactive in making a plan of action to manage the risks.
What Kind of Training Does a Chief Risk Officer Need?
A career as a chief risk management officer typically has a post-graduate education, a background in legal, actuarial, economics, and accounting, with 20 years of experience. This is because it's a senior position that requires years of prior relevant experience to handle the roles and responsibilities assigned.
To become a chief risk officer, these are the necessary qualifications you'll need:
- Earn a bachelor's degree in accounting, statistics, business, finance, or other related subjects
- Gain experience over the years to acquire at least 20 years of experience by holding some job titles such as investment advisor, risk manager, auditor, or accountant
- Obtain certifications and licenses to help you gain valuable knowledge
- Earn a master's degree in economics, business, statistics, or finance to receive a deeper understanding of risk management strategies and principles
- Grow your network by attending conventions and conferences and joining professional organizations related to your industry
To become a CRO, you need to make informed educational and career decisions from the onset of your higher education.
Important Skills for a Chief Risk Officer
Apart from educational training, a chief risk officer must have certain skills to handle the job, which include:
- Problem-solving skills help the CRO to identify and exploit opportunities that help solve and find solutions to manage business risks
- Analytical skills help in evaluating and developing strategies to mitigate a company's risks
- Communication skills help the CRO to guide companies in regulatory compliance, and proper data security practices
- Time management skills help the CRO work under pressure
- Presentation skills allow the CRO to create and make presentations for the company's board of directors and shareholders
- Communication skills allow the CRO to effectively communicate with the employees, executives, and shareholders about potential risks and ways to control them
Are There Lots of Jobs Opportunities for Chief Risk Officers?
The growing demand for chief risk officers is increasing with the rise in tech firms, resulting in financial and non-financial firms hiring CROs to comply with strict regulations and procedures. According to the Bureau of Labor Statistics, the hiring of these roles will increase by 6% through 2022, and as organizations require one person for this role, competition will be fierce.
Chief risk management officers' main employers include investment, technology, healthcare organizations, and the finance and insurance industry. The average salary of the CRO typically ranges between $40,000 to $254,000, or approximately $132,008 annually.