Financial risk analyst: Job description and activities

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Financial risk analyst: Job description and activities

1. Job description
2. Typical work activities

Job description

Financial risk analysts identify and analyse the areas of potential risk threatening the assets, earning capacity or success of organisations in the industrial, commercial or public sector. They are sometimes called risk managers. They have the responsibility of predicting change, forecasting cost to the organisation and predicting future trends.

There are high degrees of specialisation within the profession. Risk analysts may work in sales, origination, trading, marketing, financial services or private banking, specialising in:

* credit;
* market;
* operational;
* regulatory.

Financial institutions are required to manage market and credit risks daily. Risk analysts are therefore increasingly tasked with responsibilities touching all four key areas.
Typical work activities

A financial risk analyst's role is to formalise the process of risk management within an organisation. This involves business decision-making and enabling the process of risk taking. The role varies according to the area of work:

* Credit risk specialists analyse the risk to the company of its customers not paying for goods or services or defaulting on loans.
* Market risk specialists analyse the risk that outside factors may affect the share price or the market. They typically work closely with traders to calculate the risk associated with specific trading transactions.
* Operational risk analysts look at the likelihood of risky events, such as system breakdowns and employee fraud.
* Regulatory risk analysts look at the impact on the company of new legislation.

Work activities depend on the nature and business of the employer, but tasks typically involve:

* managing resources wisely;
* evaluating sources of action and proposed business decisions;
* protecting the organisation's assets and public image;
* conducting research to assess the severity of risk;
* conducting statistical analysis to evaluate risk and using statistical software such as SPSS and SAS;
* making recommendations to reduce/control risk, which may involve an insurance strategy;
* reviewing legal documents;
* presenting ideas via reports and presentations, outlining findings and making recommendations for improvements;
* working with traders to calculate the risk associated with specific transactions;
* forecasting and monitoring market trends;
* purchasing insurance;
* analysing a bank's market position and running figures through complex modelling techniques to find value at risk (VAR) measurements;
* carrying out quantitative analysis;
* using financial packages and software, including portfolio management software;
* studying government legislation, which may affect a company, and advising on compliance;
* developing contingency plans to deal with emergencies.

Financial risk analyst: Salary and conditions

* Range of typical starting salaries: £22,000 - £40,000. Salaries at the higher end of the scale are likely to be with investment banks (salary data collected May 09).
* Range of typical salaries at senior level/with experience could be anything up to six figures. In investment banks, risk analysts can earn up to £80,000 - £100,000 within two to three years. Bonuses are also available and some work is commission-related (salary data collected May 09).
* Salary levels depend on the size and type of the organisation. Most organisations also offer benefits packages.
* Working hours typically include regular extra hours, although not weekends or shifts.
* The work is mainly office based, but may involve visiting various other organisations.
* Self-employment/freelance work is a viable option on a consultancy basis, although considerable experience and expertise are required.
* There is currently a 70:30 male:female ratio, although more women are now entering the profession.
* Opportunities tend to be in large towns and cities.
* The job involves working under pressure to meet deadlines.
* Travel within a working day is frequently necessary and absence from home overnight is occasionally required.
* There may be opportunities to work overseas, particularly if you are employed by a large international company.

Financial risk analyst: Entry requirements

Although this area of work is open to all graduates and Diplomates, a degree or HND in the following subjects may increase your chances:

* finance;
* mathematics;
* statistics;
* accountancy;
* legal studies;
* business;
* economics;
* engineering.

Employers are increasingly looking for degrees in finance, mathematics or statistics. BSc courses in risk management related to finance are available at City University and Glasgow Caledonian University.

Entry without a degree or HND may be possible, but larger employers prefer graduates. Without a degree, experience in finance or insurance is usually required, along with professional qualifications.

A postgraduate qualification, such as an MSc in financial-related risk management or financial markets, can also significantly improve your employment prospects, particularly for candidates with an unrelated undergraduate degree.

Entry is also possible through graduate training programmes especially in many large finance organisations. Banks are increasingly offering graduates risk-specific training.

Pre-entry commercial experience can be an asset.

Candidates will need to show evidence of the following:

* strong numeracy and analytical skills;
* good research skills;
* planning/organisational skills and problem-solving ability;
* IT competence/computer literacy;
* negotiation skills;
* written and oral communication skills;
* the ability to explain complex issues and present technical information clearly;
* commercial awareness;
* the ability to work independently and to cope with pressure and responsibility;
* the confidence to relate to a wide range of people and to challenge people when necessary.

Competition for jobs is usually intense. The role of financial risk analyst has grown significantly in recent years, fuelled by the increasing complexity of financial products, additional regulations and the recent instability in the banking sector. Opportunities for graduates to work in risk-related roles are likely to increase following the current economic downturn as it is likely that organisations will invest more in their risk functions.

For more information see work experience and find courses and research.

Financial risk analyst: Training

Training is on the job and depends on the employer. The following organisations offer relevant examinations leading to industry-recognised qualifications:

* Chartered Insurance Institute (CII)
* CFA Institute - the Chartered Financial Analysts Programme
* Global Association of Risk Professionals (GARP)
* Institute of Risk Management (IRM)

The GARP examination, combined with two years' experience, leads to certification as a financial risk manager (FRM). The programme, which is internationally recognised, reflects the changing role of the risk professional and is delivered in two stages. Level 1 covers core areas of risk management, such as quantitative analysis, financial markets and products and essential risk modeling. Level 2 covers specific topics on the practical implementation and execution of measurement and management of market, credit and operational risk, as well as a section covering current issues in financial markets.

The IRM also offers an International Diploma in Risk Management. This course is at postgraduate level and covers risk management in a wider context, including areas outside financial risk. The course is undertaken part time through distance learning and takes three to five years to complete.

Financial risk analyst: Career development

Progression rates and routes vary according to the type of employer. In large organisations there may be scope for development internally, e.g., into management roles.

A typical career path in a large financial institution might be:

* credit risk analyst;
* senior credit risk analyst;
* risk manager;
* senior manager/managing director.

Risk is a growing area with very good career prospects. There are specialist risk consultancies that may offer employees the opportunity to move into the lucrative area of consultancy. However, some consultancies do offer graduate programmes in risk management.

Opportunities also exist to move from risk into more general finance roles.

Corporate governance initiatives and a more restrictive and expensive insurance market have given risk analysts a higher profile within organisations. The recent (2009) economic crisis has also brought to the forefront the importance of the role of risk professionals. Risk managers are now gaining a place at senior management level, responsible for creating a culture of risk awareness throughout the organisation. This higher profile has meant that risk professionals are increasingly becoming board members.

You may find that, in order to progress, you will need to move between organisations. Many professionals will change organisation within three to five years of joining. You may also need to gain additional professional qualifications for career progression with some employers.

Financial risk analyst:
Typical employers/vacancy sources

1. Typical employers
2. Sources of vacancies

Typical employers

Risk is a growing area of employment with good career prospects. Risk analysts can be found working in a wide range of organisations, predominantly in the private sector. Opportunities exist in the risk management departments of:

* investment companies;
* insurance companies;
* banks and other financial institutions;
* other medium to large-sized commercial and industrial organisations.

Self-employment/freelance work is also a viable option on a consultancy basis, although considerable experience and expertise are required to go down this route.
Sources of vacancies

Search graduate jobs on this site.

* Global Association of Risk Professionals (GARP)
* The Association of Insurance and Risk Managers (AIRMIC)
* Jobs In Risk
* Exec-appointments
* Post Magazine Online
* Times Online
* Guardian Jobs (http://jobs.guardian.co.uk)
* Independent Jobs
* employer literature and websites
* The GET Directory
* careers service vacancy bulletins and job databases

Some recruitment agencies specialise in finance and risk management posts, but vacancies advertised are usually targeted at those with experience. Examples include:

* eFinancialCareers
* The Supply Curve
* GRS (Global Risk Solutions)

See also job hunting tips and applications, CVs and interviews.

Related jobs

* Credit analyst

See also:

* Actuarial consultant
* Chartered accountant
* Insurance claims inspector
* Insurance underwriter
* Investment analyst
* Management consultant
* Operational researcher

Contacts and resources

Jobs and work

* The Association of Insurance and Risk Managers (AIRMIC) - also a good source of news and arranges conferences and training
* Careers in Financial Markets - an excellent guide to finding a job in this sector
* eFinancialCareers - also a good source for UK job market news and employment within the finance industry
* Exec-appointments - focuses on more senior-level jobs but good for career planning purposes
* The GET Directory, GTI Specialist Publishers, Annual
* Global Association of Risk Professionals (GARP) - also a good source of news.
* GRS (Global Risk Solutions) - an international specialist executive search consultancy focusing on management positions within risk, legal, tax and insurance
* Jobs In Risk - wide selection of risk and compliance vacancies within UK
* The Supply Curve - an independent, specialist job search engine dedicated to advertising vacancies for economists, statisticians and econometricians
* TARGETjobs City and Finance, GTI Specialist Publishers, Annual

Study

* CFA Institute
* Chartered Insurance Institute (CII)
* ifs School of Finance
* Institute of Risk Management (IRM)

News

* The Independent
* The Guardian
* Post Magazine Online
* Times Online

Reference

* Association of Credit Professionals
* Federation of European Risk Management (FERMA)
* Financial Services Skills Council
* London Investment Banking Association (LIBA)
* Royal Statistical Society (RSS)
* Society of Business Economists

Risk consultant: Lynne

This Case Study belongs to Financial risk analyst.

Lynne works for one of the UK’s largest banks as a risk consultant within the mortgage division. She has been in this role for two years having previously worked for a year within group risk as an anti money launder assessor. Lynne graduated in 2006 with a 2:1 in Management with Business Law.

After only one year in group risk I felt I was in need of a new challenge so when I saw the risk consultant role advertised on the intranet, I decided to apply as it looked like a role where I could directly apply the knowledge and skills I gained at university.

The interview was with three managers from the department and it took the form of a case study and practical exercise, a competency-based interview and a presentation on a prescribed topic (the top five risks facing the bank). Preparation for the interview was key. I contacted our internal audit division for help on the presentation and they were able to provide me with relevant reports, highlighting the top risks.

My degree in business management and business law has been extremely useful in my current role as I use the skills and knowledge gained on a daily basis, in particular economics, finance, corporate law and IT. The role is very much learn-on-the-job, as it’s a very practical job. There’s a lot of reading required, and a good understanding of regulation and how it applies is vital.

I work as part of a team of five risk consultants and one risk analyst, geographically spread across three different sites in the UK, so my role naturally involves some travel. My responsibilities include:

* assisting in the provision of advice and guidance to managers and staff on a wide range of operational and regulatory risk matters;
* monitoring the activities falling within these policies, regulations and codes;
* regularly updating and maintaining procedures and control standards;
* promoting a culture of risk awareness throughout mortgage operations;
* identifying areas for improvement, reporting findings and working with the appropriate areas to implement improvements.

My job is challenging and provides opportunities that other roles do not. I’m constantly busy and there’s never a dull moment and it can be stressful at times, particularly when there are deadlines to be met or when workloads are particularly high. My job requires me to deal with people of all levels, roles and backgrounds and I get to travel to visit different sites.

Since the recent banking crisis, the demands of the role have changed and more focus is being placed on operational risk and the health of processes – this has significantly increased the workload of the team. My role has remained largely unchanged, but the workloads have increased and there’s now a greater level of uncertainty about the future.

In the near future, my aim is to progress to be a senior risk consultant within my current team. The role would be similar to my present job, but would have some additional responsibilities. The way the team is structured would allow me to move areas and use the same skills in a different environment. This allows me to build my knowledge of a different operational area.

My job has quite a lot of responsibility which can be daunting and nerve-wracking at times, but it’s also a privilege. It’s a very diverse role and one that I’m very passionate about.

Case Study sourced by Jill Muirden of University of Stirling, 22 May 2009.

Financial credit risk analyst: Gary

This Case Study belongs to Financial risk analyst.

Gary works as a financial credit risk analyst with one of the UK’s largest financial institutions. This has been his first role since leaving university with an accountancy degree in June 2008.

I was particularly attracted to the financial and analytical nature of the financial credit risk analyst role as it was always my intention to pursue a career with these predominant features. I considered the analysis of financial data, interpretation of findings and presenting results offered a challenging and rewarding role and one where I could take responsibility for my own work. In addition, the possibility of joining a credit risk team within a leading financial institution provided excellent opportunities for career progression within financial credit risk, the wider credit risk discipline and other areas of the business.

I applied for the job after seeing it advertised on my university's careers website. The recruitment process involved providing a CV and covering letter; completing a numerical competency test and attending an interview with the head of the department and the line manager I’d be reporting to.

I’m responsible for managing and reporting the monthly bad debt charge for several portfolios consisting of mortgages, personal loans and banking. This responsibility includes performing analysis to identify key drivers and trends and liaising with various departments including collections, finance and other credit risk teams to identify ways to reduce the bad debt reported on these portfolios. I’m also responsible for producing various regular and ad hoc reports that detail the bad debt performance and exposure levels of various portfolios for use by a range of stakeholders.

I think it’s important that anyone who wants to pursue a career in financial credit risk should have a strong interest and enthusiasm for work of a financial and analytical nature. The role can be very challenging and tests your analytical, logical and communication abilities, but if you enjoy it and are driven on by the responsibilities of the job, the rewards can be substantial both in terms of personal work satisfaction and career progression.

In addition to the obvious financial knowledge and analytical skills developed as part of an accountancy degree, I’ve also found that the communication skills I developed during my time at university have been equally important. A key part of my role is communicating analytical findings to a broad range of stakeholders, some of whom are not based in credit risk. Participating in tutorial discussions and making presentations during my degree gave me the confidence I needed to fulfil these key aspects of my role effectively.

I particularly enjoy the analytical side of my job and the opportunity to drive my own analysis, present my findings and make recommendations. This can all be extremely rewarding. My role involves working with individuals from a range of departments and disciplines - which can be very insightful in terms of seeing the wider picture and how the business comes together.

The current (2009) economic downturn has put the credit risk department at the forefront of attempts to overcome the crisis. The importance of effective credit risk management during these difficult times has brought added pressures to my own role, but the challenges are rich and rewarding.

Credit risk offers excellent opportunities for career progression as it covers a wide spectrum of areas. Financial credit risk is only one part of the credit risk community and I’d like to take advantage of the opportunity to gain experience within other areas, which appear equally interesting and challenging.

Case Study sourced by Jill Muirden of University of Stirling, 22 May 2009.