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From CFO to CRO: Monitoring the Expanse of Enterprise Risk

Posted 09-12-2008 at 07:39 PM by sanki
Updated 09-12-2008 at 09:06 PM by sanki

Posted by Lora Bentley on August 14, 2008 at 12:30 pm

Research from IBM Global Business Services, the Wharton School and the Economist Intelligence Unit indicates that larger companies are increasingly moving their chief financial officers into chief risk officer roles, reported Thursday. Now, instead of just dealing with financial risks and compliance risks, they are handling the wide spectrum of enterprise risk — both avoiding it and taking it.

Though only 20 percent of the approximately 1200 companies participating in the survey have actually created new executive positions for risk managers, some observers suggest the CRO position is becoming a “best practice,” especially among large and highly regulated companies. Moreveor, the results show that nearly half of the participants said their CFOs had taken on the responsibilities of overseeing risk management, whether their titles changed or not. According to IBM Global Business Services’ Stephen Lukens:

Enterprises are looking at risk more systemically. Corporations acknowledge that they need to understand the material risks to their value drivers. Therefore, the number of CFOs focusing a portion of their time on risk has gone up.

Not surprisingly, companies in the finance industry are the most likey to have chief risk officers, says Risk Management Association President Kevin Blakely. He points out, however, that banks and other financial institutions tend to keep CRO and CFO duties distinctly separate. For example, “the CFO doesn’t have the capability to assess the collectibility of loan portfolios. That’s in the realm of the CRO,” he says.
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