CRO Taking The Reins | Deloitte

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Managing CRO transitions in the financial services industry

Taking the reins

Although there have long been corporate risk managers, the formalization of a senior executive with the CRO title took place recently. With a growing number of executives coming into the role, and its relatively short tenure, it is becoming more imperative to understand the hallmarks of a successful transition.

"Constant volatility, growing uncertainty, and mounting complexity and ambiguity have all contributed to a world characterized by exponential change. As these risks expand, the functions that fall under the purview of CROs will likely continue to expand as well. This will mandate CROs to continually return to the operator role to strengthen their organization's risk foundation."

About the report

The 'Taking The Reins' report was developed to help CROs overcome challenges that they have to deal with on a daily basis. The report addresses 4 key topics, which are briefly summarized in this article.

  • Becoming more strategic
  • Inside the CRO role
  • Key transition ingredients
  • Lessons learned
Taking The Reins - Managing CRO transitions in the financial services industry

Becoming more strategic

Wide range of backgrounds
While many CROs still rise through the ranks of the risk function, roughly half hail from business backgrounds. Traditional paths to the CRO seat include experience with market risk, banking and capital markets. In recent years, however, those routes have expanded to backgrounds in operational risk, compliance, and audit.

Expectations rise
Regardless of previous experience, each CRO is expected to become more strategic. However, many CROs struggle to meet these high expectations.The CRO role can be fraught with a high risk of failure - making it critical for new CROs to properly plan and manage their transitions.

Inside the CRO role

Providing an effective challenge
CROs face a range of challenges other C-level executives typically don’t encounter. One of those core difference revolves around the CRO’s obligation – as part of risk management’s oversight responsibilities – to provide an effective challenge to both senior management and the business units. The effective challenge standard requires risk management practices to be critically examined by oversight bodies with sufficient competence, power and incentives to generate change.

Earning the right to challenge
Before CROs can provide the challenge risk-based decisions require, they must gain credibility. Although not universally true, there seem to be two primary CRO background ‘prototypes’. The first category includes executives who have been with the organization for years, and the second category includes high-performing business leaders ready to climb the ladder.

Expanding Responsibilities
The third element that differentiates the CRO role revolves around its fluidity. Because the role continues to evolve, the job description frequently starts narrow but seems to expand over time.

Key Transition Ingredients

Time
When it comes to time management, CROs tend to divide their time across four diverse roles or ‘faces’: operator, steward, strategist, and catalyst. The operator manages the risk management framework, the steward protects the organization through oversight, the strategist provides risk leadership in determining the organization’s strategy, and the catalyst influences behaviors to instill a risk intelligent culture.

Talent
Talent decisions remain among the most critical for new CROs. Without appropriate resources in place, CROs have difficulty disseminating a risk culture across the organization, gaining buy-in from the business, and appropriately overseeing enterprise risks. The optimal timing for making talent changes seems to be sometime between the third and sixth month after assuming the role.

Relationships
To streamline the transition, it is important for CROs to solidify key relationships as early as possible. This can range from relationships with the C-Suite, but also relationships with regulators and with the business itself. Building these relationships can be time-consuming and difficult, but are essential for CROs.

Lessons Learned

The executives interviewed for the report were asked provide advice for new CROs, which led to the following key takeaways:

  • Decide quickly
  • You don’t need to know everything
  • Adopt systems to stay up to date
  • Keep an open mind

More information

If you have any questions about the report, please do not hesitate to get in touch.

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