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Careers in Risk Management

TFRM exam is gaining huge popularity among finance professionals across the globe. The reason behind this is the growing emphasis of organizations on risk management. Various financial crisis demonstrated how inefficient risk management can lead to the overall destruction of the economy.

Risk management includes identification and evaluation of risk to eliminate the severe threats associated with the risks. It is a highly recognized area of finance across the globe. Risk managers use several analytical, modeling, and research tools to ensure the growth and profitability of the business. Financial risk is a serious concern for all businesses. Financial risk is caused due to various factors like market movements, volatility, credit default, system failure, frauds, etc.

Here is an analysis of top careers in risk management to help you understand the different types of risk managements, their job profiles along with required skillsets:

Market Risk Analyst

Market risk arises due to movement in the prices of financial instruments. This type of risk is completely external and not under the control of the company. Also called systematic risk, it can be directional or non-directional. Directional risk is caused due to movement in interest rates, stock prices, etc. Non-directional can be caused due to exposures to volatility, etc. Market risk is primarily measured through Value at Risk (VAR).

Job functions:

  • Assessment of expected returns and losses from the investments of a company. They use several statistical models of VAR methods for the evaluation.
  • Research and analyze the market trends to identify future estimated movements
  • Reporting and presentation research results to several stakeholders
  • Coordinate with the trading desk of the company for strategy formulation and evaluation
  • Development of risk management systems
  • Analysis of risks variation for each business activity in order to detect any risk quality issue

Technical and behavioral requirements:

  • Bachelor's degree programs in finance, business, accounting, and statistics/ Master's degree in Finance
  • Sound knowledge of banking, Capital markets, Derivatives products, and market risks
  • FRM/ CFA certification
  • Good analytical skills
  • Knowledge of programming languages like python, R, etc.

Hiring companies:

Investment banks, research and buy/sell-side firms, insurance funds, etc.

Credit Risk Analyst

Credit risk is the risk that the borrower may not fulfill their obligation with respect to payment of interest and principal amount to their counterparty. Credit risk can be sovereign risk or settlement risk. Sovereign risk is caused due to foreign exchange policies of a government. Settlement risk arises when one or more parties fail to deliver the terms of a contract.

Job Functions:

  • valuation of financial data such as Balance sheet, Cash flow statement, operating statement, etc. to carry out ratio and liquidity analysis and determine the level of default risk
  • Assessment of new requests, credit inquiry
  • Perform credit due diligence on an investment, including but not limited to financial analysis, peer comparison and credit risk issues in the transaction
  • Reporting and presentation of the findings with all the stakeholders including the client and the lender
  • Ensuring compliance of company’s policies with the regulatory requirements Account reconciliation and updating

Technical and behavioral requirements:

  • achelor’s degree, ideally in finance, accounting, economics, or statistics. Master’s degree in Finance is preferred
  • Proficiency in Excel, PowerPoint, SQL, VBA, programming (R, Python, MATLAB) and Business Intelligence tools
  • Strong oral and written communication skills, attention to detail
  • Understanding of financial statements, including ratio analysis, cash flow analysis, and basic accounting standards

Hiring Companies:

  • Lending institutions like banks or insurance companies
  • Investment firms
  • Asset management or private equity firms
  • Insurance houses

Operations Risk Analyst

Operation risk originate from internal processes, people and systems. They are caused mainly due to lack of internal controls, technical failures, use of incorrect models, etc. Operations risk are very difficult to predict and mitigate.

Job Functions:

  • Proactively identifying continuous improvements to the financial control environment and associated framework, supporting policies, methodologies, and applications in relation to assurance activity.
  • Prepare regular management reports, and manage data, process flows & documentation
  • Utilize data analysis tools and methodologies to make recommendations to senior management to support process improvement
  • Design and analyze complex reports to support/control activities and make recommendations based on identified trends and facts
  • Manage and resolve all issues, identify policy gaps, and formulate policies to streamline processes
  • Appropriately assess risk when business decisions are made

Technical and behavioral requirements:

  • Master's degree, ideally with a focus on business finance, mathematics, and statistics
  • Professional certifications like FRM, PRM
  • Proficiency in PowerPoint, Advanced Excel, VBA, and SQL
  • Excellent understanding of the financial products across business (Equities, Fixed Income, Derivatives)

Hiring Companies:

  • Investment banks, research and buy/sell-side firms, insurance funds, etc.