The role of a Chief Risk Officer (CRO) has developed and evolved over time and it continues to do so. Here we’ll delve into why the role is more crucial than ever, in particular in Bermuda, which is often called the World’s Risk Capital.

In many companies, the internal audit function has been elevated from pure compliance to a role that involves regularly reviewing the organisation’s risk profile to take account of emerging risks and trends; and the CRO has become increasingly involved in strategic decision-making, with an emphasis as much on risk as it is on growth of the business.

How the role of the Chief Risk Officer has changed

Chief Risk Officers have always been a critical part of the insurance sector. Traditionally, they examined a range of pay-out scenarios under policies sold to assess risk and make provision at company level for the necessary reserving required.

However, after the financial crisis in 2008, their role expanded greatly to include identifying, locating, and managing any risk-related event or activity within or pertaining to an organisation.  Everything from data protection laws to cyber-crime can present risks that fall into the responsibilities of the CRO.

For example, the Association Management Risk and Insurance de l’Entreprise researched the most common risks CROs face and found as follows:

  • Operational: 91%
  • Fraud: 83%
  • Cyber: 79%
  • Environmental: 79%

We are all aware of the risk of climate change and cyber threats but rarely do we consider how much this impacts on what a CRO does.

Responsibilities of a Chief Risk Officer

Any potential risk that an organisation faces can cause losses in both productivity and profitability. For this reason, a CRO is responsible for detecting risks in three general areas: technical, regulatory, and competitive. They will then create and introduce policies or updating existing policies to reduce these possible losses.

Here are some of the typical tasks a CRO will undertake:

  • Develop risk maps and create a strategic risk management plan that incorporates industry-specific needs.
  • Put together risk analysis reports and progress reports that they then share with Directors, CEOs, managers, Board members and employees
  • Integrate risk management priorities into the organisation’s strategic plan
  • Analyse the possible risks that may occur from human error or system failure, and create strategies to minimize such risks
  • Determine how much risk an organisation can take on
  • Create budgets for projects that are risk-related
  • Carry out risk assessments in the case of mergers & acquisitions

Qualifications of a Chief Risk Officer

A CRO will have exceptional analytical skills as well as a knowledge of the finance, accounting and actuarial space.

In today’s business environment, a solid understanding of technology infrastructures and networks is very often also crucial.

Demand for Chief Risk Officers in Bermuda

Bermuda is well known for its highly-developed financial sector and for being an insurance hub. For approaching half a century, Bermuda has significantly contributed to the advancement of alternative risk financing. And, as an insurance hub, it is home to many re/insurance companies as well as captive managers.

During this time, the Island has worked hard to provide a business environment of transparency. The Global Forum and Financial Action Task Forces has recognised Bermuda for its lack of bank secrecy and anti-money laundering safeguards. The territory is also committed to global counter-terrorism financing mandates.

Additionally, the Island’s insurance regulations either meet or exceed the standards set by the International Association of Insurance Supervisors. The Bermuda Monetary Authority also introduced the equivalent of Solvency II (EU law that harmonises EU insurance regulations).

As such regulations evolve and the landscape continues to change, CROs have become an imperative part of an organisation’s decision-making process, and CROs now have a seat at the executive table, being seen more as a far more valuable partner than being viewed as solely the risk assessor as in the past.

Going forward, technology – such as fintech and insuretech – will continue to advance, as will the financial and insurance sector both in Bermuda and globally, meaning that role of the CRO – and the demand for such professionals – is set to grow in future.

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