Risk management is about the identification, assessment, prioritisation and management of risks that can arise in an uncertain environment.
Because there are many different types of risk within financial services, the role of a risk manager can vary substantially. Some are employed within trading and investment banking areas where expertise in statistics and financial modelling help to set trading limits and constraints. Other areas of focus can include risk management of large or new projects, risk assessment within the insurance sector, planning for business continuity in the event of disaster, and managing technological risks.
Risk managers attempt to analyse and manage the enormous variety of risks that a financial firm faces, from the likely repayment of a loan by a client to the state of the financial and currency markets. Risk managers specialise in a particular area of the business. The five areas are:
- Credit risk (individuals or companies failing to meet their repayments).
- Market risk (assessing the movements of the markets and the effect this will have).
- Liquidity risk (a particular product or market’s buoyancy).
- Legal risk.
- Operational risk (risks associated with human error, systems failures, or lack of internal controls).
In recent years, financial deals have become far more complex and, therefore, the risks associated with them have grown dramatically.
Graduates working in risk management need to be good communicators as well as have strong technical and analytical abilities. It’s important to be able to persuade colleagues and communicate potential risk to them.
The growth in international business deals has increased the risks still further. As a result, the need for risk management has soared. Recruiters in this field usually look for graduates with finance, maths, accountancy and statistics degrees.
Many companies will recruit via graduate training schemes and some will offer summer internships to students in their final year of university. These are an ideal entry point into the arena. Risk management is a part of the finance industry into which many graduates finishing accountancy training contracts are able to enter. Career prospects for those who are successful are good in this rapidly growing environment.
Hear about people working in Risk: