The global financial crisis revealed major risk management deficiencies across the banking industry. Governments and regulators have responded by imposing much tighter controls and imposed operational costs on banks.
As investment in risk management increases, so the value of this spending becomes an issue of greater importance. Senior executives of banks need to think about their risk management investments strategically. Both inseparability of the risk function from bank strategy and the growing importance of investments in the risk function elevate the Chief Risk Officer’s (CRO) role and require broader competencies.
In this perspective, we highlight what it means for CROs to think strategically about the approach to risk management both in theory and in practice.
