What is the role of a Chief Risk Officer?
Chief Risk Officers (CROs) report to the board and the CEO on various issues, including insurance, IT Security, financial audits, internal audits, fraud prevention and other corporate matters.
They must implement operational risk management and mitigation processes to prevent losses caused by insufficient or failed procedures, systems or policies.
There are typically 4 main areas of risk that they are responsible for:
- Compliance risk is related to an organisation’s ability to identify and meet its responsibilities under laws, rules, and regulations.
- Risks relating to operations, including business interruptions, labour issues, technology problems, and vendor turnover.
- The risk of reputational damage, which can harm an organisation’s reputation, recognition, standing, and value with its employees, shareholders, customers, and the general public; and
- Strategic risk entails any risk that may impact an organisation’s ability to execute its strategy.
Who does the CCO Report to?
The Chief Risk Officer typically reports into the CEO or another top executive such as the Chief Financial Officer or Chief Operating Officer.
What are the responsibilities of a Chief Compliance Officer?
The Chief Risk Officer (CRO) needs to stay up to date with all of the potential threats that could impact the business. The main responsibilities of a CRO typically include:
Risk Identification: Identifying and assessing potential risks that could impact the organization’s objectives, operations, and financial performance. This involves understanding internal and external factors that may pose threats or opportunities.
Risk Measurement and Assessment: Quantifying and evaluating the severity and likelihood of identified risks. This may involve using various risk metrics, models, and analysis techniques to assess the potential impact on the organization.
Risk Mitigation Strategies: Developing and implementing strategies to manage and mitigate identified risks. This may involve recommending risk reduction measures, insurance strategies, hedging, or other risk transfer mechanisms.
Regulatory Compliance: Ensuring that the organization complies with relevant laws, regulations, and industry standards. The CRO is often responsible for keeping the organization informed about changes in regulations that may affect its risk profile.
Monitoring and Reporting: Establishing a system for ongoing monitoring of risks and providing regular reports to senior management, the board of directors, and other stakeholders. This includes communicating the current risk profile and any changes to key risk indicators.
When Should you hire a Chief Compliance Officer?
A CRO is fast becoming one of the most important people in financial services. Despite the relatively new position, they carry a vast array of responsibilities and serve as a critical component that counters inevitable threats, and contributes to higher profits. According to Deloitte’s 2019 survey of risk management, companies that view risk management among the most important factors for achieving strategic goals tend to achieve higher growth.
For new Fintech, Ideally those at a Series A or above funding phase of growth should start to think about adopting a permanent risk function in the form of a senior risk professional.
Chief Risk Officer vs Chief Compliance Officer: What's the difference?
Whereas a Chief Compliance Officer is only responsible for potential threats stemming from breaching specific laws and regulations, the Chief Risk Officer’s role encompasses protecting the business against all potential risks; including compliance, IT, economic and reputational.
What Salary and Benefits Should I offer a Chief Compliance Officer?
The Chief Risk Officer compensation generally comprises of base salary, annual bonus, long-term incentive scheme and pension.
The general range of a base salary for a Chief Risk Officer is between £175,000 – 250,000.
The average bonus payments were from 35 –62% of base salary.
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