Everyone loves a chief risk officer

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NEW YORK – Banks damaged by this summer’s credit crisis are bringing in new chief risk officers in the aftermath of their subprime writedowns.

JP Morgan Chase’s hire of chief risk officer Barry Zubrow closely followed Citigroup’s appointment of Jorge Bermudez in a similar role, and these are just the latest in a series of risk appointments by banks.

Citigroup’s announcement was part of a wider reshuffle of risk management at the company, which included assigning a task force to evaluate how the bank’s risk analysts – like many across the industry – had been so wrong.

These developments indicate the rise of the chief risk officer, a role that has reached board-level status – one of the few benefits of 2007’s market dislocation.

Last year, maritime insurer Lloyd’s released a survey, Taking risk on board – how global business leaders view risk, which showed boards are becoming increasingly aware of the positive role of risk management. Lloyd’s underlined the importance of full integration of risk management, so that it is no longer perceived as a source of constraint but rather as a means of gaining a competitive edge.

US bank Merrill Lynch posted October writedowns of $8.4 billion, quickly followed by the hire of Ed Moriarty as chief risk officer in November. Bermudez’s appointment came days after Citigroup said it would probably write down $11 billion of its subprime assets for the fourth quarter, while Lehman Brothers and GMAC Financial Services have also swiftly followed losses with hires of new heads of risk.

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Investment banks: the future of risk control

This Risk.net survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

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