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Board Issues : Risk

In Search of a New Breed of Chief Risk Officer

August 27th, 2012 |

Heidrick-CRO-WhitePaper.pngThe price for peace of mind has gone up and nowhere is that more evident than the compensation levels for chief risk officers (CROs). If you are a large or medium-size regional bank looking to hire a new chief risk officer, you should expect to pay up to $1 million in annual compensation and potentially more depending on the size of the institution or the skills and experience needed. Demand for this talent has risen but there is a premium to pay and compensation has in many cases doubled compared to a few years ago.

Why has the price risen so sharply of late? This has become a role that can make or break a bank’s relationship with its board, shareholders and regulators. The CRO has become significantly more active in determining a bank’s strategic direction and the shape of its asset portfolio, as well as continuing to monitor traditional risk functions. The skills sought today in a top CRO are broader than they have been historically, slimming the pool of available talent significantly. Additionally, the career risk for an individual stepping into the CRO role is extremely high, making the roles themselves less attractive. CROs are increasingly blamed for a bank failure and many former CROs are now either out of the market altogether or have changed career paths, moving into consulting or joining a regulator.

This white paper examines the skills and backgrounds needed for a chief risk officer and poses four questions boards should be asking.

Paul Gibson and Avi Shatzkes, Ph.D are principals in the leadership advisory firm Heidrick & Struggles in New York. Gibson is a member of the firm’s global Financial Services Practices where he primarily conducts Chief Risk Officer and other risk related searches. Shatzkes is a member of the Leadership Consulting group and previously worked as a leadership development executive for the global markets groups at Bank of America Merrill Lynch.