SIFMA 2011: The Role of the CRO Needs to Evolve

David Merrill, CEO, FinAnalytica

At the Sifma conference in New York yesterday, I caught up with FinAnalytica CEO David Merrill. I asked him what he thought had gone under-reported, and he told me about the changing role and description of chief risk officers (CROs) on Wall Street. Here's what he had to say:

"We’ll start to see the profile—the persona—of the chief risk officer change. The type of person who was originally sought out for that role needs to change. If you go back five years, the CRO was a person who came from an accounting background or had strong math skills, or experience in operations. But those people might not have been innovators, or may have been less aggressive in meetings with other businesspeople. Back then, and even today, the CRO may not have been part of the executive team."

“The CRO is an important, vital part of the firm and that needs to be reflected in many different ways. People talk about this, but I think it stops too short: If you want to have effective and influential risk management practices in a firm, they must be embraced by the head of trading, the chief investment officer, the CEO, and the head of sales—the key players in the firm. The CRO has to be persuasive enough to get those people all interested in the objective. If they're not interested individually, then their teams won't be either, and it remains a silo. A silo won't have the necessary impact, won’t get the budget and won’t have the synergistic effects that it could have."

"I think this role will change, and an example is what happened with the role of the CTO. A lot of CTOs weren't great businesspeople, weren't great communicators—they were techie and nerdy. But that's changed. A lot of CTOs are very business-oriented, persuasive and articulate, and they have a lot of impact in terms of strategy. Those are the people who can champion projects that can really transform companies. So I think we need to see the CRO role change in the way that the CTO role has changed."

So I want to hear from you: How has the CRO role changed? How should it change in the future? How important it is to have a technological understanding of the risk management systems, and do most firms have a good risk manager already in place?

Shoot me an email at [email protected] or find me at Sifma—I always love to hear from readers.

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