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;
- risk technicians;
- risk surveyors.
They are responsible for predicting change and future trends, as well as forecasting cost to the organisation.
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:
Financial institutions are required to manage market and credit risks daily. Risk analysts are therefore increasingly tasked with responsibilities touching all four key areas.
An alternative but similar role to financial risk analyst is that of the credit analyst, in which the creditworthiness of a business is calculated and a probability of payment determined. Risk analysis is considered by many to be advanced credit analysis.
Types of work
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.
- 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 of outside factors that 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 that new legislation may have on the company.
Work activities depend on the nature and business of the employer, but tasks typically involve:
- making recommendations to reduce or control risk, which may involve an insurance strategy;
- working with traders to calculate the risk associated with specific transactions;
- liaising with underwriters and insurers;
- forecasting and monitoring market trends;
- considering proposed business decisions;
- conducting research to assess the severity of risk;
- conducting statistical analysis to evaluate risk and using statistical software such as SPSS and SAS;
- reviewing legal documents;
- presenting ideas via reports and presentations, outlining findings and making recommendations for improvements;
- 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;
- protecting the organisation's assets and public image;
- developing contingency plans to deal with emergencies.
- Typical starting salaries for risk technicians are around £21,250 plus potential bonuses.
- Salaries at risk analyst level, with up to six years' experience, are between £29,000 and £44,000 plus potential bonuses.
- Risk managers can expect to earn in the region of £46,500 to £74,000 plus potential bonuses.
- Salary levels depend on the size and type of the organisation. Most organisations also offer benefits packages.
Income data from discoverrisk.co.uk. Figures are intended as a guide only.
Working hours typically include regular extra hours, although not weekends or shifts.
What to expect
- The work is mainly office based, but may involve visiting various other organisations.
- Self-employment or freelance work is a viable option on a consultancy basis, although considerable experience and expertise are required.
- 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.
Although this area of work is open to all graduates and diplomates, a degree or HND in the following subjects may increase your chances:
- business studies;
- legal studies;
- risk management;
Employers are increasingly looking for degrees in finance, mathematics or statistics. Specific degrees relating to financial risk management are available, including:
- BSc Finance, Investment and Risk, ifs University College;
- BSc Investment and Financial Risk Management, City University London;
- BSc Risk Management, Glasgow Caledonian University;
- BSc Actuarial Science and Risk Management, Queen's University, Belfast;
- BSc Financial Planning, Investment and Risk, University of South Wales.
Entry without a degree or HND may be possible, but larger employers do 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 significantly improve your employment prospects, particularly for candidates with an unrelated undergraduate degree. Search for postgraduate courses in financial risk management.
Entry is also possible through graduate training programmes, especially in many of the larger finance organisations. Specific risk management training is sometimes included in these programmes.
Pre-entry commercial experience can be an asset.
You will need to show:
- strong numeracy, analytical and strategy skills;
- good research skills;
- planning and organisational skills and problem-solving ability;
- IT competence and computer literacy;
- negotiation skills;
- written and oral communication skills;
- the ability to explain complex issues and present technical information clearly;
- commercial awareness;
- the capacity to work independently and cope with pressure and responsibility;
- a professional approach to work, integrity and respect for ethics;
- the confidence to relate to a range of people and to challenge people when necessary.
Risk is a growing area of employment with good career prospects. Risk analysts work in a range of organisations, predominantly in the private sector. Competition for jobs is usually intense. Enhanced regulations and a more risk-conscious banking sector, means organisations are investing more heavily in their risk functions, creating more jobs in this area.
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 and freelance work is also a viable option on a consultancy basis, although considerable experience and expertise are required to go down this route.
Look for job vacancies at:
- The Association of Insurance and Risk Managers (AIRMIC)
- Institute of Risk Management (IRM)
- Jobs In Risk
- Post Online
- Risk Management Magazine
- National press.
- Employer literature and websites.
- 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. For a list of agencies, see Recruitment & Employment Confederation (REC).
Training is on the job and depends on the employer. The following organisations offer relevant examinations leading to industry-recognised qualifications:
- CFA Institute - the Chartered Financial Analysts Programme.
- Chartered Insurance Institute (CII)
- Global Association of Risk Professionals (GARP)
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 fundamental risk management.
- 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.
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 years on average to complete.
Progression rates and routes vary according to the type of employer. In large organisations there may be greater opportunities, with scope for development internally, for example, 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 or managing director.
Risk is a growing area with very good career prospects. Risk consultancies offer employees the opportunity to move into the lucrative area of consultancy and many 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 importance of the role of risk professionals is increasingly being recognised, with risk managers gaining places at senior management level and as 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 need to gain additional professional qualifications for career progression with some employers.