Risky Times Make a Chief Risk Officer More Popular

Does your management team include a Chief Risk Officer (CRO)? Risk officers are an asset to any sizeable organization, and because of that they are gaining prominence in the C-suite. 

Three in five companies have promoted their Risk officers to C-suite status and 29% are considering doing so in future, according to our Global Risk Landscape 2022 survey, covering corporations from $100m to more than $10bn in turnover across the globe. This means fewer than one in ten companies still think risk management should be relegated to non-management positions. The finding suggests CROs are becoming a must-have rather than a nice-to-have. 

In our 2019 Global Risk Landscape report, 36% of respondents were not thinking of adding a risk officer to the C-suite. In 2020, the level dropped to 32%. Last year it fell again—to 19%--so the popularity of CROs seems to have increased by ten percentage points in a year. 

One obvious explanation for this is that the world is becoming a riskier place following events such as Russia’s invasion of Ukraine, continuing supply chain problems and a growing threat of global recession.

However, a likely more accurate view is that the last few years generally have heightened awareness of the need to identify and manage risks. Before 2020, few executive boards would have imagined they had a global pandemic followed by a worldwide supply chain crisis and then rampant inflation just around the corner. 

Regional Attitudes to Chief Risk Officers

Our research found the prevalence of Chief Risk Officers was highest in the Americas, at 80%, and the Middle East, with 72%. The region where companies were least likely to have a CRO was, perhaps surprisingly, Europe. There, only 44% of risk officers occupied C-suite positions, although a further 43% of companies were considering elevating the position in future. 

The region where risk officers are least likely to enter the management team in the long term is Africa, where 22% of respondents said they were not currently considering a CRO. This figure compares to just 1% in the Americas and 6% in the Middle East. 

Other factors important for Chief Risk Officers

The popularity of CROs roughly correlates with company size, rising from 49% among companies in the $100m to $500m turnover range up to 69% among those with turnovers exceeding $10bn. 

Our research shows that CROs are most likely to be seen in financial services, where 90% of companies already have a risk officer on the board and only 2% are not planning to appoint one. On the flip side, the sector that is most reluctant to appoint a CRO is renewables, where 27% of companies are not considering such a role. 

The power and utilities and real estate and construction sectors generally seem reticent to make risk a management-level affair, with only 83% and 82% of companies, respectively, seeing the need for a CRO. 

Going forward, we might expect these numbers to change as the influence of CROs grows and creates competitive advantages for companies making risk management a board-level task. 

Our research also showed CROs can be an important counterweight to CEOs, offering different beliefs and expectations regarding risk. To find out more, read our Global Risk Landscape report now.

This content was originally published by BDO United Kingdom.