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Risk Management: Graduate Area of Work
Risk management staff ensure banks and financial companies remain both profitable and safe by educating management on the risks that they are taking.
Risk management – also known as risk control – assists the business by making known the risks that are being taken, as well as keeping it in tune with the organisation’s risk appetite.
It ensures that the company is taking enough risks to grow and generate profit, but not too much that it reaches a perilous threshold.
Risk roles are generally designated into two types: credit risk and market risk. Credit risk is primarily concerned with clients, products, and industries. You may, for example, be researching specific industries or markets periodically to assess their current stability.
Market risk, on the other hand, is more concerned with the practices of the organisation itself. It is about evaluating the wider market implications of an organisation’s practices, and then adapting the organisation’s portfolios to avoid triggering excessive risk.
The work in this function is varied. You may be involved in the modelling of a new financial product that traders are interested in selling, or tasked with reporting and explaining in detail the complexities of a financial product to senior management – who may be unfamiliar with this area of the business.
As such, the ability to simplify complex information and communicate it well is therefore crucial.
Risk management can also be carried out as part of the organisation’s operations division. In this case, the main responsibilities will be regulatory compliance and operational risk mitigation.
You may be asked to file reports to regulators, or assist in the approval of complex trades and transactions.
Banking regulations have changed significantly in recent years, with the emphasis on greater controls on what banking institutions are allowed to do and how they must report this.
Risk staff are at the forefront of this work – particularly when you consider that in risk management, you could just as easily be working with regulators on the formation of policy as with traders who are under pressure to gain advantages in a competitive market.
Most graduates who are hired into this line of work have typically completed an internship with the hiring company previously.
You are usually placed in a graduate training programme, where you will be exposed to the necessary skills, and then continue to learn through subsequent on-the-job training, mentoring, as well as internal and external training courses.
Common responsibilities that graduates may start off with include generating reports and analysing value-at-risk figures and risk of loss. Given enough time and experience, you may also be included in discussion sessions with traders.
It is important for risk management staff to know the immediate concerns of traders, salespeople, and marketers to have a proactive (rather than reactive) approach towards risk control.
Additionally, it is also possible that you will be asked to liaise with regulators from government bodies and to act as support during complex transactions. This may sometimes translate into opportunities for international assignments.
It goes without saying that good numeracy and analytical skills are key for risk roles. In fact, mathematics, economics, or science qualifications are mandatory for certain specialised risk functions.
Excellent communication skills are a definite must in this field. You will often be presenting and explaining the risks that come with complex financial products to people with little detailed knowledge of such transactions.
Effective teamwork skills are a must as well, since you will typically tackle projects with team members from diverse departments.
You will also need to take initiative to keep yourself updated with the development of new financial products – both your own organisation’s as well as its competitors’. Curiosity about the states of various global markets – what makes them tick, what might happen in the future, and what such events may mean for the organisation – is also a desirable trait.
Ups and downs
Risk management is a relatively systems-dependent field. However, due to the rapid pace at which risk models constantly evolve, the technology required for your data projections may not always be readily available.
You can expect to encounter frustrating times where you are reduced to performing work manually. Alternatively, you may even have to rig together an improvised system on your own time to perform the necessary tasks.
Perhaps the biggest advantage of working in risk is that you get to be at the centre of things – at the cutting edge of new products and trading opportunities.
Your role will be one with an inordinately high level of influence, as you can influence the shape of transactions as well as have a say in how business is done.