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In previous Blogs, we examined how the challenges #CROs face are impacting their role.
We established Top of Mind was the challenge of delivering Value Add activities to the business, over and beyond #regulatory #compliance, and the evolution of the role towards what is commonly referred to as ‘Rev 3.0’.
This has culminated in a requirement to influence #Business #Strategy and #Performance #Improvement. More than ever before CROs see their role as providing a forward-looking and commercial lens to support delivery of the Business Plan.
Finally, we questioned whether there is sufficient interaction between the #Enterprise Risk Management Framework (#ERMF) and understanding impact on the Business Plan.
In this Blog, we examine the consequences or worst case scenarios CRO will face, if they don’t solve these challenges.
Worst Case Scenarios
There are potentially a long list of worst case scenarios that could, if not addressed, undermine the position of the CRO. Whilst it would be possible to unpack this from a technical ‘Enterprise Risk Management’ perspective, what we are really talking about is a loss of influence at the top table.
The following is intended to provide a high-level checklist against which CROs can challenge their own thinking and behaviour.
Only by consistently adopting a process of reflection and self-evaluation, will there be a fundamental shift towards a strategic mindset that encourages a focus on long-term value creation and capture:
- A FAILURE TO MAKE TOUGH CHOICES – are CROs helping the business steer their way through difficult ‘risk and reward’ trade-offs that ultimately result in tough decisions?
- A FAILURE TO DESCRIBE YOUR STRATEGY IN SIMPLE TERMS – are CROs helping the business describe and communicate the strategy in simple and compelling terms?
- CONFUSING STRATEGY WITH MISSION, VISION AND VALUES – are CROs helping the business clearly articulate the strategy and distinguish between Mission (why we exist), Vision (where we are going) and Values (what is important to us)?
- THINKING STRATEGY IS THE SAME AS PLANNING – are CROs helping the business to differentiate between strategy (long-term) and Business Planning (short-term)?
- BELIEVING IN A DYNAMIC ENVIRONMENT YOUR STRATEGY NEEDS TO BE CONSTANTLY CHANGED – are CROs helping the business to pursue a stable, long-term strategy without the need to constantly ‘update, refresh, or restate‘ the strategy every year?
- BELIEVING THAT STRATEGY ONLY MEANS IMPORTANT, RATHER THAN LONG-TERM – are CROs helping the business distinguish between what is important today, versus a long-term approach?
- FAILING TO SELL STRATEGY TO WIN EMOTIONAL COMMITMENT – are CROs helping to ‘sell’ the strategy across the business through innovative and creative engagement?
- BELIEVING THAT ONLY ‘TOP’ EXECUTIVES CAN DEVELOP STRATEGY – are CROs encouraging the business to engage with employees from all levels and functions?
- A FAILURE TO BE INNOVATIVE, PARTICULALRY WHEN DEVELOPING A DIFFERENTIATED PROPOSITION – are CROs encouraging the business to ideate and experiment with different propositions from both inside and outside the industry?
To avoid the loss of influence will require the Risk Function, led by the CRO, to ditch the risk-compliance mindset and become more strategic in their approach.
The first hurdle is understanding exactly what this would require. In its simplest sense it is about adopting a more commercial and forward-looking approach, which aligns ERMF activities to key business outcomes. Progress towards these outcomes will normally be assessed through constant monitoring against pre-defined triggers and milestones, by both the Executive (through Quarterly Business Reviews) and on many occasions by the regulators as well.
But there is already an important choice CROs will need to make in how they approach this challenge. Do they focus on delivery of the Business Strategy (achieving and sustaining a competitive advantage in the chosen industry environment) OR, take on a broader role which considers the firms Corporate Strategy (choosing what businesses to be in).
There are many firms faced with the threat of significant disruption who are thinking beyond delivery of the Business Strategy (within current sectors) and are examining opportunities to explore business model innovation. There is an opportunity for CROs to to help businesses:
- Determine if and when the business needs a new business model
- Identify powerful new opportunities to serve existing customers in existing markets
- Reach entirely new customers and create new markets through disruptive business models and products
- Make business model innovation a more predictable discipline
As Executives from different businesses and sectors continue to struggle with how to execute the right strategy, this presents a huge opportunity for CROs.
Only by adopting a strategic mindset, through self-evaluation and reflection, will the CRO develop the skills and capabilities necessary to help the business win in a tough trading environment.
Darren provides Enterprise Risk Management advisory services to the Insurance and Investment Management sectors. Helping Board and C-level executives address strategic challenges, by delivering solutions that create Enterprise Value and improve business performance.
Darren is an experienced executive with over 20 years’ global experience with multinational companies, including Chief Risk Officer reporting to the Board.
Darren is an Honorary Visiting Fellow of the Digital Leadership Research Centre, Cass Business School where he also holds an Executive MBA. Darren is a Certified Fellow of the Institute of Risk Management (CFIRM) and Chartered Insurance Risk Manager (ACII) of the Chartered Insurance Institute.
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