Greater China-focused chief risk officers (CROs) are set to become more common in the funds industry due to the broadening of access to mainland assets and investors, suggests Hong Kong’s securities regulator.

Recruiters make a similar point, noting rising demand among fund houses in Asia for locally and regionally focused risk specialists and a recognition of the growing importance of these roles.

In a report* last week, the Hong Kong’s Securities and Futures Commission (SFC) said there was a nascent trend towards creating regional and Hong Kong CRO roles, with growing China opportunities expected to accelerate this trend.

These opportunities include the upcoming China-Hong Kong mutual recognition scheme, the extension of Stock Connect to exchange-traded funds, and the growth of the Hong Kong pension system, coupled with a wider range of products in which their assets are invested, said the SFC.  

Keir Macintosh, managing director at search firm Wellesley Partners in Hong Kong, saw a growing trend for regional CROs, such as for North and Southeast Asia, as asset managers push for greater business penetration.

In addition, since the global financial crisis, he said he has seen in Asia the growing emergence of independent risk functions, separate from compliance – a trend he expects to continue.

Moreover, as asset managers see their revenue streams and global market share grow, Macintosh added, “it stands to reason that you will get more experienced risk and compliance people emerging to take on those tasks with a wider regional umbrella framework rather than on a country-by-country basis”.

That said, localised risk officers remain crucial, since a “genuinely regional joined-up approach to regulation is still some way off”, said another Hong Kong-based recruiter, who declined to be named. Still, the emergence of fund passporting schemes, for instance, has the potential to create a more integrated risk environment, he noted.

Moreover, trends such as the increasing oversight of how investment products are sold and the growing size of financial-industry fines have made risk management and compliance ever more important, said the unnamed recruiter.

Another result of all this is that CROs must increasingly take on more of a leadership role within firms, he noted, rather than being just a behind-the-scenes risk manager.

*The report - "Asset Management: Looking Forward" - analysed the state and future of the global asset management industry, based on interviews by the SFC’s risk and strategy (R&S) unit with global, Hong Kong and Chinese asset managers. R&S also engaged with global regulatory counterparts, industry associations, consultants, stock exchanges, prime brokers, pension funds, sovereign wealth funds, family offices and individual investors.