Chief risk officers have ‘a seat at the table’ in making decisions

by Joan Tupponce
for Virginia Business
May 2007

Some companies, often in the financial and health-care industries, have added a chief risk officer position to their executive management team.

But even though there’s a lot of talk about centralizing the responsibilities under a single senior executive, “the idea of a high-level position hasn’t [generated the interest] people thought it might,” says Marc Lipson, associate professor of finance at the University of Virginia’s Darden School of Business.

When the CRO trend first appeared in the early 1990s, many proponents wanted to make the post a high-level position with a seat on the board of directors. “The reality is that 15 years later the position of CRO is not a board-level position,” says Tom Heim, managing director of casualty and risk management practice at Hilb Rogal and Hobbs, noting that the position varies by industry. “A CRO in a financial organization, for example, tends to be senior management. In a hospital, it might be a middle management position.”

Nonetheless, CROs have important input in major decisions. For that reason, their salaries can be in the six-figure range, depending on their responsibilities. “The salary also depends on the industry,” Heim says. “You can probably make more in the finance industry.”

Sam Marsico, the chief risk officer for Genworth Financial in Richmond, has a “seat at the table” as a member of the senior leadership team. He reports to the company’s chief actuary who also has responsibility for risk management on the CEO’s staff. “Before we offer new products or go into a new country, we assess the risks — regulatory, environmental and business — and decide if we are comfortable with them,” says Marsico. “In the last two years we have put an emphasis on business continuity planning, as well.”

The job of handling risks has become more sophisticated, thanks to enhanced analytical tools and risk evaluation, he says. “We get a better profile of the risk so we can attract better risk classes in life insurance and long-term-care insurance,” Marsico says. For example, Genworth decided not to participate in the sub-prime segment of the mortgage insurance market because they considered it a volatile risk. “We decided to focus on the prime mortgage insurance market.”

The role of a CRO is an important one, he adds. “It’s an independent function to highlight and create more transparency in the type of risks the company is taking."