Over the last few years, careers in financial risk management have become one of the most important roles in companies across the world.
Due to the global pandemic, the demand for this profession is at an all time high. Organizations have rushed to form their own risk committees, focusing on crisis management, data security and handling financial stress. In order to ensure success, organizations will need to take financial risks in order to grow and maintain sustainability. This is where the importance of financial risk managers and individuals come in.
Financial risk management is the practice of managing economic value in a firm by using financial instruments to manage exposure to risk.
According to the Global Association of Risk Professionals – the organization that certifies the FRM certification – 9 out of 10 FRM recruiters across the world are banks. Banks and companies in the investment fund industry are heavy recruiters, however in the present world today, almost every company strives to have key employees in this sector as well.
The FRM curriculum emphasizes quantitative functions a lot more compared to certifications such as the CFA (Chartered Financial Analyst). If you’re someone who enjoys large sets of data and performing multivariate regression analysis when you’re bored, you will absolutely love the FRM curriculum and the respective careers that surround it. However, the ultimate goal of FRM is to quantify and manage risks.
According to an independent benchmarking study conducted by the UK ENIC (formerly UK NARIC), the FRM is comparable to a master’s degree in ten national and regional educational systems. Based on this highly specialized content, complex candidate requirements, and industry-based curricula, the FRM was deemed equivalent to:
If you’re on your way to pursuing a career in FRM, these potential career paths may help you decide what avenue you would like to explore next.
Chief Risk Officer
The ultimate goal for many – a Chief Risk Officer is a top level executive in charge of identifying, analyzing and mitigating events that could possibly threaten a company or organization. The risks associated could be both internal or external.
A CRO also helps to ensure that a company is complying with regulations set by the respective government in the country. They review different factors which could affect an organization’s investors or performance.
They are also very relevant to profitability and productivity, spearheading efforts in relation to enterprise risk management. A CRO is expected to minimize risks in the operational function of a company.
An FRM can rise through the ranks in Credit, Treasury, Market or Enterprise to eventually take the helm as CRO. Read on to understand the starting roles in each of these departments.
Credit Risk Analyst
A Credit Risk Analyst is essential to a company, especially when taking out loans or taking credit. An analyst analyzes the risks associated with taking out loans and lending. When an applicant applies for a loan, a credit risk analyst looks over the application to ensure that the information matches the terms of the loan. They determine whether the applicant has resources to pay back the loan or the willingness to. They mostly analyze an applicant’s financial records and credit history.
A Treasury Professional in a bank is responsible for overall treasury functions of a bank. They are responsible for banks’ overall liquidity, money market functions, bond market functions, foreign exchange dealing and overall asset-liability management. Their activities are involved with taking and managing exposure to interest rate risk, counterparty credit risk, operational risk, foreign exchange risk etc.
Competency and practice in financial risk management is essential for bank treasury professionals.
Market Risk Analyst
A market risk analyst needs to analyze the market variables like interest rates, equity market price, foreign exchange rates, commodity market risk etc. A bank, financial institution and other corporates are always exposed to market risks and a market risk analyst’s job is to analyze, recommend and manage the relevant market risks to achieve the objective company objectives.
Enterprise Risk Manager
Enterprise risk management has become extremely important functions for banks over the years. Enterprise risk management seeks to control the broadest possible set of risks, from purely financial ones such as market and credit risk—the drivers of doom during the last crisis—to non-financial threats such as reputation risk. The goal of enterprise risk management is to recognize and measure all forms of financial and non-financial risk, so the firm can safely maximize its risk-taking.
By pursuing some of these career tracks, financial risk managers can work their way up the ladder and develop lifelong skills that will aid them in their career goals. The financial risk industry has many opportunities to offer, and individuals should always strive to opt for the best fit.
For more information on financial risk management, and how to become a certified FRM, watch this video! https://youtu.be/0bHkNf2LOC0