Ahead of risk or a head of risk?

(From Financial Director)

Byline: Robert Bruce.

Do you have a chief risk officer in your organisation? That is precisely the question that institutional investors, analysts and stakeholders want answered. They want assurances that you have identified someone within your organisation who oversees risk.

As a responsible executive, you should be able to offer the full list of risk measures you have taken to cover your entire organisation from risk. And that may include designating someone within the organisation as CRO - or chief risk officer. You then ought to ask yourself an important question. Does having a CRO make you, metaphorically, sleep easier at night? Or does it mean that you have simply provided another version of the safety blanket so that if something goes wrong it will be possible to work back through the procedures and show that, despite the disaster, the systems worked well, though they could not have picked up this particular disaster coming, as it did, out of left field.

CROs can be useful by acting as a focus for risk procedures through the organisation. And they could, perhaps, be useful should they identify a gaping hole in the corporate defences. But, in reality, the CRO's position is a token post to placate corporate governance nerds outside your organisation who wish to see you complying with recent corporate fashions.

Take heart from Michael Power, author of The Risk Management of Everything, a book which shows how we have retreated into a world where everything is defined as risk management and where we are no longer allowed to take risks but must instead subsume all of management into a risk model that doesn't actually lower risks but acts purely as a system for minding our backs.

Power points out that the use of the word officer "endows any role with a seriousness and officialdom which it might not ordinarily have". It is something which can be added to a long list of developments, including compliance officers, health and safety officers, information officers and knowledge officers. These fads have come and gone, and where they have stayed have generally been considered a nuisance. Not because they have provided new insights and saved directors from the consequences of their actions but because their new ...