10 Questions Boards Are Asking About Outsourcing the Chief Risk Officer Role

Jun 23
10 min read

Outsourcing the chief risk officer (CRO) role is nothing new but is gaining traction as regulatory expectations rise, organisations face tighter markets for senior risk talent and engagement preferences of individual workers change.

The same arrangements have been observed in respect of other executive roles. This is particularly the case for entities with moderate scale, limited resources and/or evolving requirements.

Irrespective of the engagement structure, the individuals appointed to Accountable Person (AP) roles are accountable for the outcomes arising under the Financial Accountability Regime (FAR), APRA’s CPS 511 Remuneration standard, and Board oversight processes. Outsourced CRO structures remain possible and aligned with financial services regulatory requirements.

Key takeaways:

Outsourced CRO models can provide specialised capability and faster uplift
Regulatory expectations focus on governance clarity, oversight and documentation
Boards must actively manage continuity, confidentiality and conflicts
Outsourcing accountable roles is an established mechanism to lift capability and capacity of governance and compliance functions

The pressure reshaping risk leadership

Regulatory pressure on risk leadership is increasing. The Financial Accountability Regime (FAR) strengthens responsibility for directors and senior executives and raises expectations around how risk decisions are documented and evidenced.

At the same time, operational risk rules such as CPS 230 place more focus on resilience and oversight of external providers for APRA regulated entities. Together, these changes mean boards must demonstrate that risk leadership is effective, independent and properly resourced.

Recruiting senior risk leaders who bring broad experience isn’t easy. Many organisations now need expertise across cyber, operational resilience, ESG and other specialised areas. Internal capability can struggle to keep up, particularly during growth or regulatory uplift programs.

What happens when expectations increase faster than risk leadership capacity? This article is a Q&A guide for exploring how an outsourced CRO model works, how regulators may view it under the current regulatory regime, and for boards and executives assessing whether outsourcing the chief risk officer role is credible, compliant and commercially sensible. We also explore what it means for governance, accountability and continuity in practice.

1. The CRO role – what are today’s current recruitment challenges?

Many organisations find that maintaining consistent senior risk leadership is more difficult than expected. Recruiting a CRO with broad experience takes time, and suitable candidates are limited. When roles remain vacant or narrowly scoped, risk programs slow and priorities drift.

Leadership turnover adds friction. A new CRO must absorb context, build strong relationships and often revisit earlier decisions. During that transition, initiatives can lose pace and reporting clarity can weaken. The impact is less about capability and more about continuity.

The scope of the role has also expanded. Today’s CRO must engage across cyber risk, operational resilience and ESG while maintaining oversight of financial and compliance risks. Few organisations hold deep expertise across all areas internally, which can leave gaps or overreliance on individuals.

Boards also expect risk leadership to move beyond monitoring into shaping decisions and strengthening governance. That requires time, authority and access to specialist insight. Where capacity is stretched, the CRO role can become reactive rather than strategic.

Taken together, these pressures make organisations ask a practical question: if a material uplift in risk capability were needed quickly, would the current structure support it or slow it down?

2. What does an outsourced CRO do?

An outsourced CRO performs the same core function as an in-house CRO - overseeing risk governance, advising leadership and providing independent challenge, with a structural differnece.It remains an executive position with accountability for shaping frameworks, guiding decisions, challenging thinking and supporting board oversight.

Organisations may engage an outsourced CRO on a fractional basis, for a defined period, or to deliver targeted uplift. Some use the model during leadership transitions. Others use it to strengthen governance or introduce specialist capability that is difficult to sustain internally. In each case, the role sits within executive decision-making team .

Clear reporting lines are still essential. Outsourced CROs typically report to the CEO and maintain direct access to the board or board risk committee. This preserves independence and ensures that risks are given appropriate consideration in conjunction with strategic and operational priorities.

Here’s a brief comparison of how the in-house and outsourced roles compare:

Factor	In-house CRO	Outsourced CRO
Engagement structure	Salaried employee	Contracted executive via company or sole trader structure
Remuneration	Salary + superannuation + bonus payments (negotiable)	Retainer fees or consulting rates + GST (negotiable)
Paid leave	Yes	No – workload managed with flexibility
Notice period	Three months	Three months
Conflicts management	Policy applies	Policy applies

There is no maximum duration of an outsourced CRO appointment and it will vary based on a number of factors including budget, organisational capacity, strategic and operational priorities. If the needs of all parties are being met and sustainable fees negotiated, effective outsourced arrangements can continue undisrupted over the medium-long term.

3. How might regulators regard an outsourced CRO?

Regulators focus on accountability and governance, and an outsourced CRO role is aligned to these requirements through supporting effective oversight, independence and clear reporting lines.

What APRA expects

APRA expects the CRO to have sufficient authority and direct access to the board, and to provide independent challenge. These expectations apply whether the role is internal or outsourced.

As with any significant business decision, a strong governance approach and clear rationale are essential. Clearly defined contractual obligations and responsibilities facilitate the ability to demonstrate a well governed outsourced arrangement.

FAR implications

FAR strengthens accountability for directors and senior executives. It requires clear accountability statements and evidence of reasonable steps.

Under FAR, an outsourced CRO is no different to an internal employee; each will be registered as an accountable person and specified accountabilities. The key difference is the nature and terms of the contract under which the individual is engaged.

The Board retains ultimate responsibility under FAR for effective risk governance and for ensuring the appropriate selection of suitably capable individuals for key roles.

Material service provider considerations

An outsourced CRO arrangement may be treated as a material service provider under CPS 230, depending on the scope of engagement, circumstances of the regulated entity, rationales adopted by various boards, and views of individual regulatory teams. There are a variety of approaches in place across the financial services industry at present.

This would trigger expectations around due diligence, contractual clarity, contingency planning and service level requirements. For the engagement of individuals to fulfil accountable person roles, this may in part involve an overlay of performance planning, objective setting, key performance indicators, behavioural expectations, and CEO and Board monitoring and review processes.

Other risk factors may present in similar ways to the appointment of individuals on an employment basis and can be managed accordingly. For example, employees in senior roles may resign from their employment at any time and the amount of notice served can vary with the timing of resignation (e.g. probationary periods, time of year, planned leave, etc.) and the circumstances of their departure (e.g. potential conflict with objectives in next role, pressing team objectives, level of dependency, etc.).

4. Are there other examples of effective outsourcing in regulated environments?

Outsourcing a CRO role isn’t a break from established governance practice. Regulated environments already use outsourced models for other accountable roles – examples include:

Interim or contracted Chief Executive and Chief Operations roles during transition, remediation or strategic uplift periods.
Chief / Head of Internal Audit roles, often outsourced in small to medium, less complex organisations.
Responsible Manager roles under Australian financial services licences, where specialist expertise is engaged externally.
Company Secretary roles, commonly outsourced in smaller or growing organisations.
AML/CTF compliance officers and compliance managers, frequently delivered by external providers, with boards and senior management retaining accountability.

In each case, while employment structure changes, governance obligations remain the same. Boards are still accountable and must actively oversee the function with clear reporting lines and documentation.

5. What about continuity risk – what happens if the outsourced CRO leaves?

Continuity risk exists in both in-house and outsourced models. But the nature of the risk differs slightly between models.

In-house model risk	Outsourced model risk
Resignation with short notice.	Contract termination, with notice period.
Recruitment delay.	If the relevant personnel resigned from the outsourced service provider, the provider has an ability to leverage the collective insights of the firm and access alternate resources as required to ensure seamless continuity of coverage.
Knowledge concentrated in one individual, as well as the supporting team, where relevant.	Dependency on an individual consultant rather than the firm. The internal supporting team would also hold collective insights and knowledge, whist the consultant would also have access to leverage the collective insights of their organisation.
CRO unavailability risk	CRO/consultant unavailability risk. The external service provider can scale-up resources quickly to support any unavailability of the outsourced CRO or the internal risk team, including during times of competing work priorities.

An in-house CRO may resign with limited notice, triggering a lengthy recruitment process. That person may hold much of the knowledge, which can make the transition slower and more disruptive. Under a single person outsourced arrangement, similar concentration may arise when the contract ends or the consultant is re-assigned.

While continuity isn’t eliminated by either model, organisations can manage these risks through structure and documentation. Common mechanisms include:

Longer contractual notice periods
Formal handover and transition requirements
Clear documentation of key risk decisions and board advice
Centralised record keeping of risk positions and rationale
Access to firm-level backup capability, where relevant.

Continuity risk becomes more visible when structures are weak. Where roles, decisions and escalation pathways are clearly documented, transitions are less disruptive and oversight remains strong.

6. Is outsourcing more expensive than hiring internally?

Costs can often be the first concern, and the comparison between an in-house and outsourced model is broader than salary alone.

An internal CRO typically incurs both direct and indirect expenses:

Base salary and superannuation
Incentives and other employment on-costs
Recruitment fees and executive search costs
Downtime risk during vacancy or transition

Also consider that a prolonged vacancy can slow decision-making or delay uplift programs across the organisation.

An outsourced CRO usually involves a contracted fee for defined services. The cost may appear higher on a day-rate basis, but it can include access to wider industry expertise and proprietary consulting tools. Longer term retainer arrangements can nevertheless be negotiated for cost effectiveness, while retaining access to the additional benefits.

The scope can also scale up or down as needs change.

Additional to considerations on comparing costs should include:

Capability breadth: Does the arrangement provide access to broader experience?
Speed of uplift: How quickly can the organisation strengthen frameworks or address identified gaps?
Remediation cost: If risk issues surface, what is the likely cost of investigation, regulatory response or reputational impact?

7. How does an outsourced CRO impact the independence and culture of my organisation?

Boards can worry that bringing in an outsourced CRO might disrupt culture or weaken trust. The impact depends on how the role is structured and introduced to the organisation.

Independence

An outsourced CRO can strengthen independence. Outsourced CROs are typically less embedded in long-standing relationships, making it easier to provide clear challenge and raise uncomfortable issues. An internal CRO can become closely aligned with individual teams and leaders over time and may be subject to top-down pressure to ‘not rock the boat’.

The external perspective of an outsourced role can help reset expectations and sharpen board visibility.

Cultural integration

Cultural fit requires intentional onboarding, clear role boundaries and regular engagement with executives and business units.

Leaders can ask questions such as:

Does the CRO understand our strategy and risk appetite?
Are they visible and accessible to key teams?
Do reporting lines support open discussion?

When integration is planned, the CRO role can support culture. This remains the case whether the role is resourced internally or outsourced to a suitable provider.

Conflicts and confidentiality

Outsourced CRO arrangements can require additional safeguards. These typically include:

Defined information-sharing protocols
Formal conflict of interest declarations
Confidentiality clauses in contracts
Non-disclosure agreements
Ethical walls within the provider firm, where relevant.

With these controls in place, an outsourced CRO can operate with independence while respecting culture and confidentiality.

8. When does outsourcing make strategic sense?

Here are some practical scenarios that may prompt boards and executives to seek outsourced CRO arrangements:

Rapid growth outpacing internal capability

Growth brings new products, systems and service providers, while risk frameworks lag behind expansion. An outsourced CRO model can provide short-term scale and uplift while internal resources adjust and frameworks are uplifted and tailored to the new business profile of the organisation.

Regulatory remediation or uplift

Following a review or supervisory finding, organisations may need to strengthen frameworks quickly. An experienced outsourced CRO can focus on stabilisation and structured uplift without waiting for a lengthy recruitment process.

Capability gaps in specialist domains

Some risk areas now require deep expertise. Cyber security, operational resilience and ESG expectations continue to evolve. Where internal teams lack this breadth, outsourced capability can fill defined gaps.

Succession risk in the CRO role

If the current CRO is nearing departure or there is key person risk, continuity becomes a concern for boards. An outsourced arrangement can bridge transition periods or reduce reliance on a single individual.

A board seeking greater independence

Boards sometimes want stronger separation between operational management and risk challenge. An outsourced CRO can promote independence while maintaining clear reporting lines.

9. How should boards evaluate whether outsourcing the CRO role is right for them?

Risk models differ across every organisation. Boards need to reflect on whether their organisation's current structure supports the risk profile, strategic direction and regulatory obligations – and whether to consider an alternative model.

Considerations include:

How dependent are we on one individual for risk judgement and board advice?
Do we maintain clear records explaining why key risk decisions were made?
Could we demonstrate the CRO’s independence under regulatory review?
How quickly could we strengthen risk capability if expectations changed?
Is our current structure resilient to turnover or unexpected absence?
Have we formally assessed alternative models, including hybrid or outsourced arrangements?

10. What risks arise for my organisation if CRO capability remains under-resourced?

When CRO capability is stretched, gaps tend to appear gradually.

With insufficient resources, reporting may lack depth, documentation may fall short and emerging risks may not be escalated early. What begins as a small oversight can become a formal regulatory finding. Investigations, legal advice, program resets and reputational repair can then consume more of management time and financial resources than prevention activities.

Strategic blind spots can also develop. If the CRO function focuses on compliance tasks, it may have limited capacity to challenge new initiatives or assess downside scenarios. Decisions can then proceed without a full view of risk.

If risk reporting feels reactive or inconsistent, board directors may question whether they have a clear line of sight, eroding their confidence over time. That uncertainty can slow decisions or increase reliance on external assurance.

There is also a more subtle shift. The risk function can become transactional, focused on checklists and reporting cycles. When that happens, it loses its value as a strategic adviser and sounding board for leadership.

While these outcomes aren’t inevitable, they highlight what can occur when capability doesn’t keep pace with organisational risk.

Reviewing your risk leadership model

Risk leadership is crucial to an organisation. Boards need confidence that risk capability, expertise and governance structures match the organisation’s risk profile and growth plans. Specialist CRO resourcing firms can respond at short notice to provide the required leadership and hit the ground running, leveraging their broad experience across a wide range of organisations.

If there is a gap, it’s better to identify it early than discover it through failure or regulatory intervention. Outsourcing isn’t the only option, but it can be a credible way to strengthen risk capability quickly and scale support as needs change.

At Hall Advisory, we provide outsourced CRO services, along with outsourced Chief Executive, Company Secretary and Responsible Manager, and other executive services. If you’re reviewing your leadership or organisational structure, we welcome a conversation about what model may suit your organisation.