Who Owns Risk?

First came chief accounting officers, now chief risk officers are making their mark.

Nearly half of executives in a new study report their company has a chief risk officer (CRO), up from 33% two years ago. The elevated role in the C-suite has resulted in CFOs losing the top spot as the primary owners of risk management.

The survey of nearly 400 executives, conducted by Accenture at the beginning of this year and released today, reports that only 14% of finance chiefs hold the ultimate responsibility for risk management, compared with 34% two years ago.

In addition, more CEOs can claim ownership of risk. Accenture reports that 23% of the survey respondents, who are all C-suite executives, say their CEO owns the responsibility for risk management, compared with just 13% in 2009.

Steve Culp, managing director of Accenture’s risk-management consulting line, says the change is partly due to the rise in CROs in general as businesses have expanded globally and risk management has moved beyond a compliance and modeling exercise. “The overall size of the complexity pie has increased,” he says.

Moreover, CFOs shouldn’t feel they are losing any authority. Rather, just as the finance chief’s position has evolved in recent years beyond number crunching, so has the CRO role, Culp says. “When we look at the financial-services sector, we have seen a higher percentage of C-level executives responsible for risk separately,” he says.

In contrast, a recent survey of risk managers and executives by Marsh reports CFOs have the primary responsibility for risk. Nearly 30% of the respondents reported their finance chiefs carry that role.

Accenture Risk Chart

Any shift is most prevalent at financial-services firms, which were forced to thoroughly reevaluate their risk-management programs following the financial crisis and the passage of the Dodd-Frank Act last summer. A recent Deloitte survey of financial institutions reports 86% have a CRO or equivalent, and most of them report to the board of directors, the CEO, or both.

Accenture also sees the rise of the CRO as a sign that risk management has moved up in importance on the overall corporate agenda and is demanding wider attention beyond the finance department. Smart companies are using it to gain competitive advantage by factoring it into their strategic planning, the consultancy claims.

 

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