CEO is still the Real CRO
It was just a couple of weeks ago Riskviews posted…
A week later, Reuters ran a story about JP Morgan…
In that article Rachel Wolcott suggests that the CRO needs to be powerful enough to buck the most powerful traders.
What she fails to recognize is that the CRO and the trader are both acting out the orders of the CEO. If the CEO is telling the CRO to enforce a risk limit and also telling the trader that he is free to break the limit, then it is not the power of the CRO that is the problem.
It is a CEO that wants the appearance of risk management and the profits from excessive risk both at the same time.
CEOs will often allow underlings to “fight it out” rather than making all of the decisions in the company. In this case, however, everyone must realize that when it appears the CRO is too weak to do their job, that means that the CEO is not standing behind them and is completely responsible for the risk that is being taken by the overaggressive traders.