Cfo responsibilities and duties pdf

Risks cfo responsibilities and duties pdf commonly categorized as strategic, reputational, operational, financial, or compliance-related. CROs are accountable to the Executive Committee and The Board for enabling the business to balance risk and reward.

The CRO is responsible for assessing and mitigating significant competitive, regulatory, and technological threats to a firm’s capital and earnings. The CRO roles and responsibilities vary depending on the size of the organization and industry. The CRO works to ensure that the firm is compliant with government regulations, such as Sarbanes-Oxley, and reviews factors that could negatively affect investments. Typically, the CRO is responsible for the firm’s risk management operations, including managing, identifying, evaluating, reporting  and overseeing the firm’s risks externally and internally  to the organization and works diligently with senior management such as Chief Executive officer and Chief Financial Officer.

According to Watson, the majority of CROs agreed that having only exceptional analytical skill is not sufficient. The most successful CROs are able to combine these skills with highly developed commercial, strategic, leadership and communication skill to be able to drive change and make a difference in an organization. CROs typically have post graduate education with over 20 years of experience in accounting, economics, legal or actuarial backgrounds. CROs need to balance risks with financial, investment, insurance, personnel and inventory decisions to obtain an optimum level for stakeholders. A main priority for the CRO is to ensure that the organization is in full compliance with applicable regulations and to analyze all risk related issues. The responsibilities and requirements to become a chief risk officer vary depending on the size of the organization and the industry, however most CRO’s typically have a masters-degree level of education and 10 to 20 years of business-related experience, with actuarial, accounting, economics, and legal backgrounds common. There are many different pathways to become a CRO but most organizations prefer to promote their own employees to the position internally.

When comparing the function of a CRO to the rest of the officers, we find that there is a relationship with every other role. In other words, for a process in any department in a firm to be completed it has to be discussed with a CRO to clear it of potential risks. In general, the CRO has many crucial tasks to look for in any organization to better serve its needs and mitigate its risk. According to the Enterprise Risk Management Initiative, CROs need to find a way to balance risks and inventory decisions to obtain an optimum level for stakeholders and maintain a positive reputation regarding the firm.

A Chief risk officer must identify, assess, measure, manage, monitor and report every aspect of the risk function of new implementations of the firm. Also, the CRO’s assistance is necessary when it comes to new developments. Risk Chiefs must be leaders in developing and improving management reporting as well as providing user training for in-house developed systems. In addition to developing policies and frameworks, the CRO is responsible for training and supervision of employees. Another important task is managing the development of new risk policies and procedures and participating in local and global discussions to enhance security processes and standards. The role of the CRO is still evolving as the scope of task is constantly changing. The increasing regulatory and legislative requirements of organizational compliance makes the CRO to one of the most important member of the management team.

To be able to view risk in the context of the whole company and to organize different risk functions and task through the different entities of the organization, is inevitable to the success of any structural planning. The title of a CRO is a fairly new position in a company that is continually evolving. The responsibility of a CRO can be supported by the CEO or CFO. However, having an independent position to mitigate risks close to the executive board is a real asset for the company. Although the title of CRO is fairly new, job titles such as CFOs and CEOs also have functions of a CRO. Risk Manager and Capital Manager.

Although these related positions don’t necessarily replace a CRO, they do hold job functions that are similar to those of a CRO. Some names can be cited as examples of Chief Risk Officer. This new position is found in many different industries. The major one is in the financial sector. Companies in other industries have hired CROs in order to become more competitive. CRO of Archer Daniels Midland while being a member of the executive board.

On August 1993, James Lam became the first worldwide CRO at GE Capital. He is called the inventor of the ERM model. As a CRO, Lam’s responsibilities were to mitigate the risks of the company. He managed the credit risks, market risk, risk transfer and hedge risk. In 1995, a few company executives started to hire CROs in their organizations.

But the demand was still low in the CRO position. In 2002, the US government released a new law which influenced the CRO industry significantly. The Sarbanes Oxley Act which gets popular with 2004 says that directors or executive are more severe against counterfeit of financial corporate information. By hiring CROs, companies have started to protect the executives more. Ten years later, 2005, almost all big companies that were making sales over a billion dollar hired a CRO in their enterprise. These companies were almost in a difficult environment and that’s why they began to recognize the importance of a CRO.

Another boost for the CRO role was the financial crisis in 2008. Many companies became bankruptcy and many jobs were destroyed. After these events, more and more CROs were hired. With the increase in regulation in the economy, the position of the CRO is gaining more importance. The worldwide globalization is also increasing the importance of CROs.

Most of them come from the financial service, energy or commodity industry. In the future, the importance of the CRO will be measured by the complexity of the compliance risk. Chief Risk Officer is dependent on the industry and the type of the business they are working in. Having to understand the compliance with government regulations such as Sarbanes Oxley of 2002, it is common for CRO’s to have also held a Chief Financial Officer position prior to becoming a Chief Risk Officer. With their quantitative background in math, finance, and accounting – making the change to risk management would be a familiar experience. Whether in the technology, retail, healthcare, or finance industry – the qualities of a typical Chief Risk Officer are very similar throughout the industries. Their financial expertise will aid in creating reporting procedures that will monitoring any critical risks an organization may encounter.