Common Challenges faced by Chief Risk Officers in their Role

The common challenges faced by Chief Risk Officers (CROs) in their role, as highlighted in the provided sources, include:

De-risking: CROs face challenges in de-risking, especially in addressing future risks such as regulatory/compliance risks, economic downturns/recessions, and macro/geopolitical risks, which they feel least prepared to handle.

Growth and Strategic Change: CROs need to align risk management with business objectives and ensure that risk activities are strengthened in areas like emerging risk and trend analysis, risk strategy alignment with the business, and data analytics and predictive modeling to support growth and strategic change.

Regulatory Compliance: Regulatory and compliance issues pose significant challenges for CROs, with regulators/government agencies and stakeholders/investors creating pressure and interest around risk management. CROs must ensure that compliance and other risk activities are agile, tech-enabled, strategic, and supportive of business growth.

Effectiveness and Efficiency: CROs are tasked with increasing risk management budgets, leveraging digital tools like artificial intelligence (AI) and machine learning (ML) to accelerate risk management processes, and focusing on building skills and capabilities within their teams to enhance data, analytics, and risk management practices.

Cost Takeout: Cost takeout involves reducing overall costs associated with governance, maintenance, oversight, and execution of risk requirements and practices. CROs need to consider outsourcing strategic risk management, financial risk analysis, cybersecurity, and technology-driven risk management to optimize costs while improving risk posture.

IT Risks: CROs face challenges related to managing technology risks, monitoring fraud, and adapting to new situations that require constant revision of risk management plans. Technology risks are a top concern at the executive level, with a focus on reputation risks, criminal activity sophistication, remote working risks, and outsourcing vendor selection.

Climate Risk and Model Risk: In the life insurance sector, CROs encounter challenges related to climate risk, model risk, IFRS 17 compliance, and ensuring the effectiveness of their risk framework. These challenges highlight the need for CROs to navigate evolving risks and external changes while providing strategic guidance and oversight.

In summary, Chief Risk Officers face a multitude of challenges in their roles, including de-risking, managing growth and strategic change, ensuring regulatory compliance, enhancing effectiveness and efficiency, optimizing costs, addressing IT risks, and dealing with specific industry-related challenges like climate risk and model risk in the life insurance sector. These challenges underscore the critical role of CROs in navigating complex risk landscapes, ensuring organizational resilience, and driving strategic risk management practices.