Chief Risk officer and factors to consider while selcting any vendor

1. CHIEF RISK
OFFICER
Its Role and Responsibilities in the Company-An
overview

2. Meaning of Chief
Risk officer (CRO)
 A chief risk officer is a corporate
executive responsible for identifying,
analyzing, and mitigating internal and
external risks. The chief risk officer
works to ensure that the company
complies with government
regulations, and reviews factors that
could hurt investments or a company's
business units.
 The position of chief risk officer is
constantly evolving. As companies
adopt new technologies, the CRO must
govern information security, protect
against fraud, and guard intellectual
property. By developing internal
controls and overseeing internal
audits, threats from within a company
can be identified before they result in
regulatory action.

3. Role and Responsibilities of CRO in an organisation-An Explanation
In times of technological evolution, risk has become part and parcel of business. As such, the Chief
Risk Officer needs to design relevant strategies to handle and mitigate the risks. They are more
concerned with data protection, risk assurance, and eradicating threats and system vulnerabilities.
The roles and responsibilities of a Chief Risk Officer depend on the organization’s size and the
industry you are working. The responsibilities of the CRO include:
 To ensure that the risk management policies are directly reflected in the organization’s strategic
plans
 Timely risk assessment process through risk management expert or in-person
 Prepare documentation related to risk assessment
 Create a budget plan for concerned projects
 Take a thorough look at the audit practices of accounting, compliance reports, and safety measure
 Recognize the threats to the reputation of the organization, which include blunders in the
marketing process
 Documenting risk analysis reports to various stakeholders such as board members, C-suite
executives, and employees
 Evaluating the operational risks that might occur due to system failure or human error, which in
turn leads to the disruption of business processes. In such a scenario, it’s the responsibility of the
CRO to formulate strategies to overcome the risks
 Recognize the potential threats to operational efficiency and financial stability of the organization
 Develop risk-related plans and formulate strategies to minimize and mitigate risks and also
monitoring the progress of the project

4. How to ensure credit worthiness of the client
before signing Vendor Agreements
 Simply put, creditworthiness is the ability of your
customers/clients/vendors to pay you, which is why it’s
important to understand how to determine creditworthiness
before you enter into an Agreement with the
customers/clients/vendors. To determine the
creditworthiness of a vendor, you need to understand their
reputation for paying on time and their capacity to continue
to do so.
 Those factors include their revenue and outstanding
obligations. You also need to understand the company’s
future business prospects and trends within their industry
that could affect their ability to pay you.
 The important factor that the organization have to consider
before executing and agreement with the vendors as
discussed on the following pages:

5. A. Assessing the financial capabilities of the client-
Assessing your customers’ financial health is vital to ensuring the security of
your business, and there are several important indicators which will give you a
more informed picture. Let’s look at a few.
 Look Out for Fixed Charges- If the owners have a fixed charge over
company assets, it means they get paid first in the event of insolvency.
 Have They Accrued Losses as an Unsecured Creditor?- Being an
unsecured trade creditor in insolvency leaves a company three times more
likely to fail, but the level of risk is variable.
 Beware Late Accounting or Charges in Accounting Periods- Overdue
accounts or a change in a filing period are clear indicators that a company
is in trouble. It may indicate a business is poorly managed and doesn’t have
the procedures in place to meet statutory obligations.
 Be Wary of Low Margins- Businesses working on low margins often have
little room to manoeuvre when hit by an unexpected missed payment.
Problems may be compounded if the company struggles with other issues
such as bad-debt making up a high proportion of overall revenue
 Assess Liquidity- Poor liquidity can lead to a constant need to plug holes in
cash flow, which is expensive, time-consuming, and often fatal for a
business

6. B. Ensuring the business Credibility of the client-
Getting to know the client and their business track record increases the likelihood of
getting payments and is actually a very difficult task and most have devised their own
way of going about the process. Here is a checklist to ensure about the credibility of
the client;
 DnB Report– It can be sought by paying a very nominal amount to them. They are
considered the most reliable
 ECGC – Though it covers very small percent of the risk, but it still helps in chaffing
out the worst where the risk is inevitable
 General Intelligence with professional groups - Checking with Fellow Business
owners helps in gathering some intelligence on: 1) payment terms, 2) its business
partners, 3). bank it is doing business with, 4) kind of customers the client has.
 Past performance of buyer– There are many websites providing data of past buying
patterns of the companies
 Professional associations- Reach out to Professionals at various levels from the
client company and try to gather some info.
 News- Search for News on the brand, there can be a small splinter found which can
soon become big fire

7. C. Founders:-
 Finding the founder of the client and
Running a background check on them
should show past customer reviews and
give a us an idea of the vendor’s ability to
complete contracted work on time.
 We can also check if there is any Civil
Litigations and Criminal Convictions
against the Founders and Management.
 It is also crucial to check if there is any
Regulatory Violations done by the
Founders and Management.
D. Overall background check or due dilligence
of the client:-
The background check will include the review of
the following documents;
 Memorandum of Association
 Articles of Association
 Certificate of Incorporation
 Shareholding Pattern
 Financial Statements
 Income Tax Returns
 Bank Statements
 Tax Registration Certificates
 Tax Payment Receipts
 Statutory Registers
 Property Documents
 Intellectual Property Registration or
Application Documents
 Utility Bills
 Employee Records
 Operational and lragal Records