Every so often there rises to the surface sentences so clear and prescient

Risk & Insurance, Sept 1, 2004 by Cyril Tuohy

Every so often there rises to the surface sentences so clear and prescient in the gobbledygook of financial services writing that they bear repeating.

This month, in our cover story, P. Richard Hackenburg, vice president of insurance services concern FOJP, told our writer: "You know who a company's chief risk officer is? It's the chairman of the board. Someone else serving as CRO is a bunch of hooey. At the end of the day the office of the CRO is an irrelevancy."

Hackenburg deserves to be elected president for putting into plain English (the word "hooey" notwithstanding) what keeps every risk manager up at night. And it is this: Corporations say they want or need proper risk management. They just don't want to pay for it. In other words, they want something for nothing. (Doesn't that sound familiar?) Note that Hackenburg says the office of CRO is irrelevant, not the job. In a C-suite showdown, you can bet the CEO will bump off the CRO in favor of the CFO.

As the Sarbanes-Oxley Act places more onus on boards to take responsibility for managing risk, the position of CRO may be headed for extinction as the board chairman becomes a de facto CRO. What a cruel irony, that laws designed to make companies more responsible for risk management spell doom for the very folks hired to manage risk.