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So Hot Right Now: Risk Officers

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In 2010, the year he was appointed Bank of America's Chief Risk Officer, Bruce Thomson's compensation topped $11 million, making him the highest paid executive at the firm (CEO Brian Moynihan, by comparison, received $1.94 million and former Countrywide CEO-cum-BAC in-house cocktail waitress took home $17,509 in tips**). Does Thomson's massive package make him stand out when he and his peers in the field attend two weeks of risk camp every summer? Apparently not, because according to a guy who studies such things, risk officers are gettin' paid. And not only that? People are starting to show them respect. Like acknowledging their existence in the elevator respect.

Citigroup, AIG and UBS are among other companies raising the profile of risk executives. The derivatives meltdown that sparked the 2008 Lehman Brothers Holdings Inc. collapse and an 18-month recession catapulted the role from obscurity to contention for future chief executive officers. “The person sitting in the risk chair now is reporting to the CEO so the caliber has to be higher,” said Neil Hindle, who runs the CRO search practice at Egon Zehnder International in New York. “There has been a real increase in power over the last two years.” That’s evident in the compensation, which can reach $10 million at large financial institutions now, compared with $500,000 as recently as 2001, Hindle said. Five years ago, a CRO typically reported no higher than the CFO, he said. Citigroup Chief Risk Officer Brian Leach said it’s expected he’ll have a seat at the table when Chief Executive Officer Vikram Pandit makes key decisions. A decade ago, a bank risk executive often wasn’t in the room, he said.

Yes, it's a whole new world for once invisible employees who previously were accustomed to coming into the office several times a quarter and finding someone else at their desk, because HR "didn't realize someone sat there." Unfortunately, the pay and the sense that the people you've worked for for 5 years know your name isn't Steve (≠ Tom) will not last long, because according to HBS professor Jay Lorsch, we've got about two or three years before people can go back to not giving a shit about you/the work you do anymore.

“Business, by its very nature, is risky” and the focus on risk managers feels “kind of like a fad” as companies want to show investors they are working to avoid the pitfalls that led to the recession, said Jay Lorsch, a corporate governance professor at Harvard Business School in Boston.

To that end, isn't this a bit cruel? Would it be better for risk managers to not receive the pay/respect bumps, rather than know what it tastes like and have it taken away? Sure, Brian Leach will have a seat at the table when Vikram makes key decisions now but in 8 quarters? He'll be lucky if VP doesn't walk into the room and sit on him, having not noticed anyone was in the chair.

Chief Risk Officer Rises To $10 Million Job [Bloomberg]

**He works hard for the money.


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