Fwd: INARM Message - RE: Mission and Purpose of the CRO

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Dave Ingram

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Oct 19, 2013, 11:20:02 AM10/19/13
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Begin forwarded message:

From: Brett Riley <brett...@finity.com.au>
Date: October 17, 2013 12:20:34 AM EDT
To: Stephen Britt <Stephe...@iag.com.au>, inarm inarm <in...@list.soa.org>
Subject: INARM Message - RE: Mission and Purpose of the CRO

Thanks Steve – good posting.
 
For me the need for a CRO exists because:
 
1.       Risk has increased and become more complex in the last 20-30 years. For many financial institutions you need someone monitoring risk full time.
2.       Related to this, you need a capable individual to lead the risk function, covering the various analysts and business unit CROs and analysts to ensure risk is managed effectively.
3.       They bring a different skill set to other executives, assuming they’re right for the job (solid technical grounding, commercial acumen, able to deal with the qualitative side of risk e.g. communication, persuasion, and a healthy dose of scepticism and an inquisitive mind)
4.       They help improve the risk/return payoff for the company.
 
For me the need for a stand-alone CRO increases with the size and/or complexity of the business. For many small financial services companies with simple business models I question the need for an independent CRO. But for a large multinational it is critical to have a good CRO.
 
To actively sell the position, I’d probably put more emphasis on point 4. above.
 
This raises an interesting point in the context of APRA’s recent proposal to require independent CROs for all Australian banks and insurers. The regulator’s key concern is the CRO should have no first line responsibilities. I think this can work if the CRO is not responsible for taking key front line decisions (e.g. setting underwriting policy, selecting the reinsurance program, setting strategic asset allocations). However we don’t want the CRO to be cut off from these deliberations, only brought in to review decisions after the event when it might be too late. This can be managed to get the balance right.
 
By the way I’ve written a piece suggesting that some actuaries with the right skills and experience should consider the new CRO positions which will emerge in Australia. It will appear in the October Actuaries magazine, which elaborates on a few of these points, so keep an eye out for it.
 
 
 
Regards
 
Brett Riley FIAA CERA
 
Description: Finity Logo
 
 
From: Stephen Britt [mailto:Stephe...@iag.com.au] 
Sent: Thursday, 17 October 2013 2:11 PM
To: inarm inarm
Subject: INARM Message - Mission and Purpose of the CRO
 
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
 
While musing about nothing in particular recently, I thought rather holistically on the Purpose of the Chief Risk Officer.
 
I you had to explain in a few short sentences what your raison d’etre was as the CRO of a financial institution – what would you say?
 
If you were going to actively sell the position, would you position your statement differently?
 
Steve.
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Dave Ingram

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Oct 19, 2013, 11:20:06 AM10/19/13
to inarm-emer...@googlegroups.com


Begin forwarded message:

From: Stephen Britt <Stephe...@iag.com.au>
Date: October 17, 2013 1:12:38 AM EDT
To: Brett Riley <brett...@finity.com.au>, inarm inarm <in...@list.soa.org>
Subject: INARM Message - RE: Mission and Purpose of the CRO

Note: This e-mail is subject to the disclaimer contained at the bottom of this message.


I’ll keep an eye out for it, but I’ll scan the CRO job ads with even more scrutiny ;-)
 
Steve
 
From: Brett Riley [mailto:brett...@finity.com.au] 
Sent: Thursday, 17 October 2013 3:21 PM
To: Stephen Britt; inarm inarm
Subject: RE: Mission and Purpose of the CRO
 
Thanks Steve – good posting.
 
For me the need for a CRO exists because:
 
1.       Risk has increased and become more complex in the last 20-30 years. For many financial institutions you need someone monitoring risk full time.
2.       Related to this, you need a capable individual to lead the risk function, covering the various analysts and business unit CROs and analysts to ensure risk is managed effectively.
3.       They bring a different skill set to other executives, assuming they’re right for the job (solid technical grounding, commercial acumen, able to deal with the qualitative side of risk e.g. communication, persuasion, and a healthy dose of scepticism and an inquisitive mind)
4.       They help improve the risk/return payoff for the company.
 
For me the need for a stand-alone CRO increases with the size and/or complexity of the business. For many small financial services companies with simple business models I question the need for an independent CRO. But for a large multinational it is critical to have a good CRO.
 
To actively sell the position, I’d probably put more emphasis on point 4. above.
 
This raises an interesting point in the context of APRA’s recent proposal to require independent CROs for all Australian banks and insurers. The regulator’s key concern is the CRO should have no first line responsibilities. I think this can work if the CRO is not responsible for taking key front line decisions (e.g. setting underwriting policy, selecting the reinsurance program, setting strategic asset allocations). However we don’t want the CRO to be cut off from these deliberations, only brought in to review decisions after the event when it might be too late. This can be managed to get the balance right.
 
By the way I’ve written a piece suggesting that some actuaries with the right skills and experience should consider the new CRO positions which will emerge in Australia.. It will appear in the October Actuaries magazine, which elaborates on a few of these points, so keep an eye out for it.
 
 
 
Regards
 
Brett Riley FIAA CERA
 

Dave Ingram

unread,
Oct 19, 2013, 11:20:11 AM10/19/13
to inarm-emer...@googlegroups.com


Begin forwarded message:

From: Tyson Mohr <tyson.m...@statefarm.com>
Date: October 17, 2013 10:02:29 PM EDT
To: Stephen Britt <Stephe...@iag.com.au>, Brett Riley <brett...@finity.com.au>, inarm inarm <in...@list.soa.org>
Subject: INARM Message - RE: Mission and Purpose of the CRO

A CRO plays a role in ensuring that significant risks have specified owners who are held accountable for evaluation, mitigation, results, etc. It’s unhealthy for an organization to have the responsibility for risk diffused throughout the enterprise. It leads to unhealthy choices and inhibits the ability to learn from mistakes. The CRO wouldn’t be allocating the risks herself, but she would champion this discipline to senior leadership.
 
This is a good reason for the CRO not having first-line responsibilities. When the CRO is not assuming risk herself, her incentive to drive that organizational change is stronger.  
 
-Tyson
 
From: Stephen Britt [mailto:Stephe...@iag.com.au] 
Sent: Thursday, October 17, 2013 12:13 AM
To: Brett Riley; inarm inarm
Subject: INARM Message - RE: Mission and Purpose of the CRO
 
Note: This e-mail is subject to the disclaimer contained at the bottom of this message.
 
I’ll keep an eye out for it, but I’ll scan the CRO job ads with even more scrutiny ;-)
 
Steve
 
From: Brett Riley [mailto:brett.riley@finity..com.au] 
Sent: Thursday, 17 October 2013 3:21 PM
To: Stephen Britt; inarm inarm
Subject: RE: Mission and Purpose of the CRO
 
Thanks Steve – good posting.
 
For me the need for a CRO exists because:
 
1.       Risk has increased and become more complex in the last 20-30 years. For many financial institutions you need someone monitoring risk full time.
2.       Related to this, you need a capable individual to lead the risk function, covering the various analysts and busi ness unit CROs and analysts to ensure risk is managed effectively.
The message may contain confidential and/or privileged material.. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon this information, by persons or entities other than the intended recipient is prohibited.
 
If you have received this in error, please contact the sender and delete this e-mail and associated material from any computer.
 
The intended recipient of this e-mail may only use, reproduce, disclose or distribute the information contained in this e-mail and any attached files, with the permission of the sender.
 
This message has been scanned for viruses.
 
 

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