Deloitte’s sixth annual Global Risk Survey demonstrates the expanding role of the chief risk officer, but it also reveals there’s still lots of room for growth when it comes to enterprise-wide risk assessment programs.
The firm, which polled 111 international financial institutions with combined assets totaling more than $79 billion, found that 78 percent of CROs report to the board of directors and/or the bank’s CEO. In 2006, only 42 percent reported to the CEO, while 37 percent reported to the Board of Directors. And 63 percent of institutions have adopted a formal statement of risk appetite. “With the magnitude of the credit crisis and the ultimate losses, boards (of directors) are questioning a number of areas for responsibility—the senior management, finance and risk functions,” says Deloitte’s Ed Hida. “At the same time the focus has been to strengthen the risk function.”
However, the research firm found that only 36 percent of the institutions had an enterprise risk management program, although 23 percent were in the process of creating one. There’s incentive to create an ERM program—85 percent of the institutions that have adopted ERM programs reported the total value derived from the program exceeded the cost.
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