5 Ways Chief Risk Officers Must Pivot Their Role

In the midst of U.S. midterm election results, the public witnessed various instances of new leadership arising in a changing political climate. Just as politicians learn to pivot their stances to best address the current needs of their state and country, so too can chief risk officers (CROs) restructure their roles in changing market dynamics. Risk mitigators may have consistent work in identifying and managing risks within regulatory stances, but evolving the role of CRO will allow companies to better address the risks in a changing market during these politically diverse times.

How can CROs adapt to best serve their companies?

1. Take responsibility for addressing new risks.

After the financial crisis in 2008, CROs gained a higher status of importance to the company team as “chief integrator,” “chief worrier” and first responder to unpredictable business. In order to continue stepping up to the plate, CROs can acknowledge when risks have elevated in severity and be vocal in board discussions. Risks in the insurance market and credit sectors have since been overshadowed by new operational risks. It’s up to CROs to speak up when new strategic decisions need to be made.

2. Develop trust with risk teams.

Specialists working alongside the CRO have invaluable experience that cannot be overlooked if companies want to strengthen the effects of risk management. CROs may report to the CFO or CEO; however, the CRO does not act alone and can benefit from collaborating with their team. Small risk teams manage risk reporting, while larger risk teams provide in-depth reporting on risk appetite and limits. To account for multiple changes in the market, CROs will be able to cover larger ground with their risk teams.

3. Understand the pros and cons of the latest technology jargon.

The vast vocabulary of automation, AI and big data remains prominently one of the dynamic parts of risk management that CROs need to keep up with. For instance, data science’s role in finance has been shown to be advantageous while also time-consuming. Trends like bitcoin and blockchain received labels for being detrimental and helpful, respectively. New intel on machine learning, for instance, shows that it may be a tool to use in fraud management. CROs can pivot with ease in these changing times by keeping up with new insights in technology and using what works best.

4. Expand focus on cybersecurity.

Increasing risks arising in the cybersphere of finance require CROs to be able to withstand the volatile nature of cyberattacks. To successfully ease into the new dynamics, CROs can analyze how their current systems could be hacked in order to see the holes in their risk management. Implementation of new IT and AI may allow for greater efficiency, but CROs should stay attentive to operational systems attacks.

5. Challenge and improve existing model systems.

Learning from past risk management models can help CROs strengthen their next moves in the face of changing risks. For example, previous studies with the Bank of England PRA showcase the need to challenge risk management processes to locate areas of improvement. These studies have labeled models as a liability and a risk for businesses. But now, CROs can benefit from simplifying practices from confusing language and applications into a clear model that utilizes machine learning to increase accuracy.

Looking Forward

Dynamic market changes can be handled with ease as CROs stay engaged as the representatives of teams managing new risks. As technology updates, there is a greater need to keep up with which trends are useful and which ones have gone out of style. Furthermore, a greater focus on cybersecurity will give CROs a stronger standpoint to navigate the new risks. Finally, efforts to challenge and improve the existing models for risk management will provide CROs the experience to pivot around market changes moving forward.