Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer

Abstract

Enterprise risk management, under the leadership of chief risk officers (CROs), has the promise to bring enterprise-wide risks, which threaten the achievement of the firm's strategic objectives, into the open and under control. Its organizational significance is that, by providing a process to identify, measure, monitor, and manage uncertainty in strategic decision-making, strategic planning, performance management, and deal-approval processes, it enables top management to maintain or alter patterns in risk-taking. This chapter addresses the question: How may CROs realize that organizational significance? I draw on the existing practitioner and academic literature on the role of CROs and on a number of case studies from my ongoing research program on the evolution of the role of the CRO. I outline and illustrate four major roles that senior risk officers may fulfill: compliance champion, modeling expert, strategic controller, and strategic advisor and discuss the contingencies that shape the mix and effectiveness of these roles in actual organizational settings.