Corporate risk has been around ever since businesses came into being. While diversifiable risk can be mitigated by taking appropriate measures, it is next to impossible to eliminate systematic risk which is entirely dependent on market fluctuations.
Businesses thrive on consistency and performance. Risk, on the other hand, threatens to disrupt the normal flow of operations inside a business. This is why most companies employ risk management teams that are responsible for identifying imminent threats and countering them with appropriate measures.
Corporate Risk in Old Times
In the earlier days, business risk catered to unprecedented issues like fire, theft, employee injuries and accidents. Businesses would create contingencies to indemnify the enterprise in an unpleasant situation. With time, financial aspects like interest rates, exchange rates and other financial risks entered the mix. However, due to their nature, these challenges would be tackled by the finance department inside the company.
There are operational risks, compliance risks (particularly in highly regulated industries), strategic risks and reputational risks involved in business. Most of these are handled by specific departments within the organization to leverage the expertise of these teams in troubleshooting company issues. The C-Suite, particularly the CEO (Chief Executive Officer) would look after all these risks and their mitigation plans to ensure the company is moving in the right direction.
Corporate Risk in Modern Perspective
The landscape of corporate risk these days is extremely different, which has given rise to the concept of hiring CROs (Chief Risk Officers). These individuals (and teams) are entrusted with the responsibility of mitigating risk across the organization in a collaborative manner. Managing risk is no longer the role of independent departments and cannot be done in seclusion. The CRO takes into account all company policies and limitations, crafting solutions that match the resources available.
More recently, another dimension has been added to business risks. Given the integrated nature of technology and rampant use of technological resources in business processes, the CRO is also entrusted with the responsibility of mitigating the threat of cyber crime. With increasing interconnectedness of networks, the risk of cyber security breaches is heightened, intensifying the role of a CRO.
In most cases, CROs work independently, away from mainstream company operations. However, they’re integrated across the organization. They would normally report to the C-Suite (CEO, COO, or the CFO) and also attend strategic company meetings. The role of a CRO is evolving rapidly, adding risk mitigation responsibilities across all fronts.
Roles and Responsibilities of CROs
Here’s a list that’ll help you fully understand the scope of a CRO. It is important to note that the role of a CRO keeps evolving. There may be more dimensions added to the job responsibilities of a CRO, depending on the nature of the business.
- Mitigating Financial Risks
- Crafting plans to address cyber threats in liaison with the IT department
- Enterprise Risk Management (ERM)
- Addressing political risks
- Risks instigated by multiple languages and cultures in the workplace
- Conflict management
- Change management
- Managing Reputational risk
- Handling Regulatory risk
- Fulfilling Stakeholder obligations
- Looking for Diversified investments
- Employee engagement and satisfaction
- Striking up strategic business partnerships
- And more.
In a nutshell, the CRO works across the organization to mitigate risk in all forms.
Some Interesting Statistics about the evolution of CROs
The roles and responsibilities of CROs are evolving rapidly, almost at the same pace at which technology evolves. In 2000, only 45% of financial companies employed a CRO. Less than two decades later, almost 80% of such companies have officially hired a CRO to mitigate risk in the organization.
According to the US Bureau of Labor and Statistics, the demand for compliance and risk officers are likely to grow by 11.1% between 2012 and 2020, particularly for the banking and financial services industry.
The demand for risk professionals is increasingly steadily with thousands of new jobs being posted every month. Over the last decade, there has been over 400% increase in employment of risk professionals, which is further expected to increase.
Moreover, advanced degrees in risk management have been introduced to prepare individuals for their roles as the CROs in different organizations. Experience, however, is the number one attraction when it comes to evaluating candidates. Leadership qualities are an essential.
To learn more about how ProActive Risk Management can help you build or execute the most efficient risk management strategy, call us at 1-877-744-2637.