What is a chief risk officer (CRO)? A detailed CRO job description

Why is having a CRO crucial in the enterprise?

Organizations have long been concerned with business risks that can threaten productivity and profitability. However, in recent decades, the formalization of those efforts in the form of enterprise risk management (ERM) led by a dedicated CRO gained momentum in the wake of regulatory requirements, such as the Sarbanes-Oxley Act of 2002 (SOX). Concerns fueled by legislation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, have made the CRO position even more important in the C-level hierarchy.

In addition to compliance risks, CROs are typically concerned with monitoring risks related to insurance, IT security, financial auditing, internal auditing, global business variables, fraud prevention and other internal corporate investigations.

The CRO is responsible for executing operational risk management and mitigation processes to avoid losses stemming from inadequate or failed procedures, systems or policies. Operational risk management includes business continuity and disaster recovery planning, developing information security processes and managing the governance of regulatory compliance data.

Risk categories that a chief risk officer manages

Generally, the CRO is responsible for the company's risk management operations, including oversight of its risk identification and mitigation activities. A typical CRO must consider various types of risks, most of which relate to one of the following categories:

• Compliance risk. This type of risk involves the organization's mechanisms for identifying and meeting its responsibilities under the laws, rules and regulations that apply to it. The CRO also ensures that the organization complies with regulations, such as SOX, and any other rules and laws that govern its internal processes, external engagement practices and sales.
• Operational risk. There are many elements that could affect the organization's ability to transact business, such as business interruption, labor issues, technology problems and vendor turnover.
• Reputational risk. CROs should consider any element that could harm the organization's brand image, recognition, standing and value among its employees, shareholders, customers and the public at large.
• Strategic risk. This category encompasses anything that could affect the organization's ability to execute its risk management strategy.
• Physical risks. There are risks from physical dangers that could impact workers. For example, the CRO of a company that has warehouses typically must analyze and mitigate the risks posed to employees who operate or work alongside heavy machinery.
• Geopolitical risks. There are geopolitical and environmental risks as well. CROs in global companies must consider how political instability and natural disasters could disrupt business operations and harm workers. As a result, they must develop strategies to protect against such risk events.
• IT risks. There are also risks associated with information technology, which has become integral to business processes. The CRO is increasingly involved with analyzing and mitigating the risks of hackers and data breaches. Information protection strategies and risk assurance efforts have become a key part of the CRO's job, as has the ability to identify vulnerabilities and threats to the company's data networks.
• Financial risks. The CRO oversees risks related to capital management, liquidity, investments and credit exposure. This ensures stability against currency fluctuations and economic downturns. CROs also conduct stress testing and scenario analysis to evaluate financial vulnerabilities and strengthen risk mitigation strategies.

Because the possible risks to an organization stem from different business functions and often cut across divisions, CROs must collaborate with the other senior executives to identify areas of concern, devise mitigation processes and provide continuous monitoring of changes in the risk landscape.

Chief risk officer roles and responsibilities

Some of the most common tasks and responsibilities associated with a CRO role include the following:

• Threat mitigation strategies. A CRO is responsible for developing risk maps and strategic action plans to mitigate the company's primary threats. They achieve this by integrating strategic risk management priorities into the company's overall strategic planning.
• Risk monitoring and tracking. CROs monitor the progress of risk mitigation efforts. This responsibility involves tracking key risk indicators, assessing control measures and reporting findings to other C-level executives.
• Risk reporting and communication. A CRO communicates with company stakeholders and board members about the organization's risk profile and performs risk assessments. They are also responsible for developing and disseminating risk analysis and progress reports.
• Information assurance strategies. The CRO develops and executes information assurance strategies to protect against and manage risks related to the use, storage and transmission of data and information systems.
• Internal risk evaluation. A CRO evaluates potential operational risks, such as employee errors and system failures, that could disrupt business processes. They develop strategies to minimize exposure to these risks and ensure an effective response.
• Risk appetite assessment. CROs are responsible for determining the company's risk appetite and quantifying the amount of risk it should take on. For example, they might use financial models, stress tests and scenario analyses to measure the potential effects of various risk scenarios.
• Funding and budgeting. CROs oversee funding and budgeting of risk management and mitigation projects. This includes evaluating the cost-effectiveness of risk strategies, ensuring adequate funding for compliance measures and aligning financial planning with the organization's overall risk appetite.

Chief risk officers also conduct due diligence and risk assurance on behalf of the company during business deals, mergers and acquisitions. For example, the CRO might investigate the risks surrounding a company that's being targeted for acquisition and assess the reliability of its risk management frameworks and processes.

Required skills and qualifications

The CRO's job description and qualifications vary depending on the industry and size of the organization. For example, a bank's CRO must understand financial compliance requirements, fraud prevention and potential threats to monetary transactions. Nevertheless, the CRO job is a high-level executive position that requires an advanced education, extensive experience and proven business, managerial and interpersonal skills.

Skills

CROs typically have a post-graduate education -- ideally, a master's degree in business administration, finance, economics or risk management. They might also have expertise in Basel II and III reforms, credit risk, liquidity risk and financial risk mitigation. They usually have more than 20 years of experience in accounting, economics, legal or actuarial work, and many have specialized training in risk management.

Some CROs also have experience working in or with the IT or cybersecurity teams, as online risk mitigation has become vital to corporate success, particularly for digitized companies.

Many CROs have worked as auditors, accountants, financial analysts, loss prevention officers, operations managers, risk managers and security analysts. Some have been IT managers, chief information officers or chief information security officers. CROs are also expected to have familiarity with compliance regulations, such as SOX, the General Data Protection Regulation and the Health Insurance Portability and Accountability Act, and their relation with risk governance.

A CRO candidate might also have experience working with executive teams, conducting internal audits and reporting to a board of directors.

Qualifications

To identify and assess risks and develop mitigation strategies to reduce those risks to acceptable levels, a CRO must have the following skills:

• Strong leadership abilities to steer an organization toward regulatory compliance and strong data security protocols.
• Strong quantitative and analytical skills to run the necessary calculations needed to address risks.
• Finance and accounting skills to understand the impact of various risks on the company's budget and revenue.
• People skills -- also called soft skills -- for collaborating with, influencing and educating employees about risk-related issues.
• An understanding of technology systems, networks, IT infrastructure and cyberthreats.
• Presentation skills to convey complex risk concepts in a way that audiences with varying degrees of expertise can understand.
• Communication skills to advocate for strategic efforts to reduce the organization's risk exposure.

Salary and job outlook

The 2023 report "The State of Risk Oversight" from the Enterprise Risk Management Initiative at North Carolina State University revealed that 40% of surveyed organizations are dedicating an executive to lead the risk management process. Risk experts have predicted that the CRO position will become even more commonplace as organizations face more threats and an increasingly complex risk landscape.

According to Salary.com, the average annual salary for a CRO in the U.S. is just over $269,000. CRO salaries are influenced by factors such as the industry, region and years of experience in risk management practices.

Chief risk officer courses and certifications

CROs don't need a license, and there's no requirement for specific college degrees or certifications. However, there are numerous programs aimed at training people to become CROs and that offer existing CROs advanced education, such as the following:

• Chief Risk Officer certificate from Carnegie Mellon University's Heinz College.
• Master's degree in risk management from New York University's Stern School of Business.
• Master's program in business analytics and risk management from Johns Hopkins Carey Business School.
• Loyola University's Master of Jurisprudence program in compliance and enterprise risk management.
• Enterprise Risk Management graduate certificate from Boston University's Metropolitan College.
• Various training programs from ISACA, an IT governance association.
• Professional Risk Manager certificate offered by the Professional Risk Managers' International Association.
• Certified Chief Risk Officer certification by the American Institute of Business Management.

FAQs about the CRO role

The following are among the queries frequently asked about the chief risk officer role.

Why is a CRO needed in an organization?

Every organization faces a host of threats and risks that could negatively impact its operations and stakeholders, including shareholders, employees, customers and the broader community. Some risks could even threaten the organization's existence. Moreover, these risks are evolving fast and getting more complicated. They can be particularly complex at large, global or publicly held companies. Having a CRO with the education and experience to identify, assess and mitigate such risks is critical for these organizations.

What is the CRO's role in ERM?

The chief risk officer oversees the enterprise risk management function and sets its strategic direction and tactical execution. As such, the CRO is responsible for securing the necessary resources, including funding, talent and tools, to carry out the ERM mission and for lining up support from the other executives and key employees.

Who does the CRO report to?

The chief risk officer typically reports to the chief executive officer or board of directors.

How will the CRO role evolve in the future?

The chief risk officer position is becoming more important for organizations of all sizes as the number and severity of risks continue to rise. These evolving risks, including new ones that come with emerging technologies, are putting pressure on CROs to advance their organizations' enterprise risk management functions.

Consequently, the CRO must work toward continuous improvement of the ERM function, perfecting its processes, adopting best practices and adopting new tools. These steps ensure that the organization is continually identifying risks, analyzing them for potential impacts, devising appropriate mitigation tactics and monitoring their execution.

Enterprise risk management brings together executive-level risk owners to enhance the management of all organizational risks. Explore the different roles and responsibilities of the risk management team.