There’s a new sheriff in town and you can call him (or her) “Chief Risk Officer.”

If you don’t already have a chief risk officer, or haven’t given it much thought, you can hardly be blamed. It’s a relatively new position, born largely out of the depths of the financial crisis and regulators’ desire to see a more centralized oversight of a bank’s exposure to various types of risk.

A chief risk officer, in a nutshell, is a member of the executive team whose job it is to take a holistic view of the bank’s exposure to various kinds of risk – across credit, operations, IT, audit, legal and more – and to help integrate that bank’s risk appetite and risk management into the overall business plan.

As recruiters will tell you, finding a good chief risk officer is a tall order – in no small part because the role is largely still evolving.

“They’re actually very challenging searches,” said Laura Goode, co-managing partner of the executive talent search firm Kiradjieff and Goode. “I think to be successful, you have to bring – and a lot of our clients talk about this – the partnering skills of a trusted business advisor to your CEO and board and someone who takes a strategic viewpoint and a holistic view of risk. A CEO can benefit greatly from having a strategic business partner in their chief risk officer who is thinking ahead of, what do we need to be ready for, to be proactive in looking at risk?”

But there are few, if any, formal training programs for bankers wishing to rise to the position of a chief risk officer. Goode said that she often sees successful chief risk officers come from backgrounds in audit, operations, credit, IT or compliance. Perhaps more importantly, that person has to have the soft skills to be viewed as a good business partner, rather than an enforcer.

“I think they have to have impeccable judgment and integrity,” Goode said. “It really is, in a lot of ways, the person that helps the board and CEO sleep at night.”

‘A Work In Process’

There’s a very good reason your typical community bank might not have a chief risk officer, however: they aren’t cheap.

Compensation advisor Arthur Warren said that among his 144 community banking clients, just 33 employ a chief risk officer and they average a base salary of about $240,000. The pay, which he estimated had increased about 15 percent year-over-year among his own client base, is high and the bonus potential is low, he said, in order to ensure the independence of the position.

“I have clients now that want an MBA, they want tremendous financial service experience, the ability to project, to build risk sensitivity, they have goods kills in mathematics, good skills in projections,” he said. “The job, the skills and the scope is a work in process. It’s just not settled at this point as the regulations emerge and as each banking regulator, either state or federal come in, the requirements get morphed and refined.”

And while the very largest bank holding companies (those with $50 billion or more in assets) in America do need to employ chief risk officers in order to comply with rules promulgated by the Federal Reserve early last year, community banks typically don’t consider the chief risk officer role until they hit at least $750 million in assets – though Warren said he more commonly sees that role in banks closer to the $3 billion to $5 billion asset range.

“There’s a lot of smaller community banks [in Massachusetts that] can’t really afford this position,” he said.

Every bank faces a certain number of risks simply by the nature of the business, but at a smaller and less complex community bank, having responsibility for those various risks dispersed among different departments isn’t the end of the world, as long as the chief executive or chief operating officer has a strong handle on the bank’s overall risk profile, said Robert M. Mahoney, president and CEO of Belmont Savings Bank.

“I think either model works, the dispersed model with a chief executive or chief operating officer who has familiarity and can play that role, or because of the sheer size or geographic dispersion or a gap in the chief executive’s background, you might go the chief risk officer role,” he said, adding, “This is not somebody right out of school, this is not somebody 10 years out of school. These are expensive and hard to fill positions.”

In explaining why Belmont Savings doesn’t employ a dedicated chief risk officer, Mahoney, who once held that title at Citizens Bank back in the early aughts, put it this way, “We have a pretty simple model. I can drive our entire territory in about a half an hour and all the managers live in one place every day. I can keep my finger on the pulse pretty easily.”