Chief Risk Officer Analysis: 2020 Update

Over the last three years (2018-2020), the Chief Risk Officer position has experienced significant turnover at the top US bank holding companies, with more than 50% of the banks selecting a new executive to lead the function.

INTRODUCTION

Second Line Advisors conducted a 2020 update of research and analysis on today’s Chief Risk Officers from the top US bank holding companies (>$50B in total assets) and the largest foreign banks operating in the US (>$25B) to identify trends on talent, profile, and diversity. Over the last three years (2018-2020), the Chief Risk Officer position has experienced significant turnover at the top US bank holding companies, with more than 50% of the banks selecting a new executive to lead the function. However, there was more stability in the role in 2020 compared to recent years, with only six new CROs hired last year compared to nine in 2019 and 12 in 2018. There were fewer external new CRO hires in 2020, only one, as compared to previous years (three in 2019 and four in 2018).

Key Takeaways

  • Tenure: The average tenure of the CRO increased to 4.1 years in 2020, compared to 3.6 years in 2019.
  • Internal vs. External: Similar to previous years, the large majority of CROs came into their
    position internally, with only about one third having been hired externally.
  • Diversity: In 2020, 33% of the new CROs hired are diverse (2 out of 6). There were zero new female CROs hired in 2020, whereas there was at least one new female CRO hired in both 2019 and 2018.
  • Previous Position: In 2020, newly hired CROs came from more varied prior roles compared to in 2018, including audit, HR and accounting.
  • Prior CROs: Of the six prior CRO incumbents, only one holds a Chief Risk Officer position today.

Key Takeaways - U.S. and Foreign Banks

Top U.S. Bank Holding Companies (>$250B vs. <$250B)

Largest Foreign Banks in U.S. (>$25B)

  • Tenure: Tenure for CROs at the smaller banks (<$250B) has remained consistent from 2018 to 2020 (average 3.6 to 3.9 years), while tenure at the bigger banks (>$250B) increased to 4.7 years in 2020, compared to 2.9 in 2018.
  • Previous Position: Smaller banks (<$250B) are more open to non-traditional risk profiles. Only 38% of <$250B CROs’ came directly from a risk position, compared to 56% of >$250B CROs.
  • Diversity: Among the smaller banks (<$250B), there has been a slight upward trend in diversity. In 2018, overall diversity* of CROs was 24%, which rose to 31% in 2019, and climbed further in 2020 up to 38%.
  • Tenure: Tenure for the largest foreign bank CROs increased to 3.9 years in 2020, compared to 3.3 years in 2019.
  • Previous Position: Risk backgrounds remain the overwhelming majority among the largest foreign bank CROs for both overall experience and previous position (72%).
  • Diversity: While overall diversity* increased in 2020 to 48%, compared to 30% in 2019, the majority of foreign bank CROs remain male.

Top U.S. Bank Holding Companies (>$250B vs. <$250B)

Diversity

Since 2017, there has been an upward trend of racial and gender diversity in the Chief Risk Officer role in the top US bank holding companies and the largest foreign banks in the US. This underscores a focus and initiative to improve diversity at the leadership level. However, there is still room for further progress at the executive level for risk management. Although the majority of CROs for the top US bank holding companies are male (80%+ the last four years), there has been a slight upward trend of more female CROs (18% in 2020).

KEY TAKEAWAYS

  • Of the standing CROs for the top US bank holding companies who were hired into the position
    externally, 50% are diverse*, up from 35% in 2019 and 2018.
  • For the biggest US banks (>$250B), there has not been a female CRO hired since 2018. Furthermore, of the five new CROs hired the last two years at the biggest banks, only one was diverse.
  • While the majority of CROs for largest foreign banks remain male, overall diversity* increased in 2020 to 48%, compared to 30% in 2019.

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Second Line Advisors

Second Line Advisors

Second Line Advisors is the leading executive search firm for Risk, Compliance, and Regulatory. With decades of executive search experience, we are trusted advisors to Financial Services, Banking, and FinTech clients in the areas of Risk Management, Compliance & Financial Crime, and Regulatory. Our services include Executive Search, Board of Directors Search & Introductions, and Talent Pipelining & Succession Planning.

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