Home / The SIBOS Blog / Please demote the CRO [#SIBOS]

Please demote the CRO [#SIBOS]

There are a huge number of conversations here, but one thing has arisen as a consistent theme that I didn’t expect.  It is the integration of the risk and finance functions.

That started as a conversation over Basel III and continued as we discussed the impact of regulatory change in general.  Risk and finance are now symbiotic.  They are as one.

I guess that’s not surprising when you consider that liquidity coverage and leverage ratios are based upon financial reporting that relates to risk metrics, but it is more fundamental than this.  The Chief Risk Officer is now in the driving seat and, if he or she is not, then the bank is out of control.

That is the sense I am picking up from all of the conversations around SIBOS this year, and it makes for interesting dialogue.  After all, if the CRO is the chief, what does that do to digital and IT?  CRO’s are not customer focused, they are risk focused.  I had this great conversation once between the CMO (Marketing) and the CRO (Risk), and the CMO was throwing rocks at the risk guy for rejecting all of the amazing applicants to the bank that could have grown the business overnight.  The bank’s credit portfolio could have doubled, if not for the CRO.

But the CRO sat calmly and said “most of your applicants stink”.  It was a seminal moment in my career, and clearly marks the territory between risk and reward.

So now we have CRO’s in the driving seat and effectively becoming the chief of budgets.  Wow!  That’s a newbie and not necessarily a good move.

After all, if banks are viewing new fintech start-ups, innovation and hot developments, the chief avoider of risk is going to say: get away.  Do not invest in these ideas!!! Stick to our knitting.

In other words, I am concerned about the ascendance of the CRO.  It may be good from a regulatory and compliance and risk viewpoint but, from an innovation and change view, the CRO is a killer app.

And by that I mean he or she will kill the app.

Ah well, off to see what’s hot on the exhibit hall.

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Chris, I feel you are passing too harsh a judgement on the CRO. As the RM has evolved into a CRO, I see a new generation of (credit) risk-savvy directors and officers ascend. The modern CRO sees risk as both a top-line and a bottom line issue, well aware that zero losses doesn’t make for a profitable bank if revenues fail.
    On the other hand, I’ve also encountered CMOs that are more focussed on marketing than the market.

  • Can we do something simpler. Can we have risk teams that talk to each other, speak with one voice and have answers to questions that don’t involve governance, escalation, sign off of spreadsheets with a matrix nobody will ever read but take months to negotiate internally.
    #bonuswars