Risk management careers are often misunderstood. People may not totally understand the sort of things that risk managers do, or even why they are required.
Risk is an inherent part of life, and there are only certain things that we can do to try and deal with that. Some of these risks are pretty small, but when it comes to big businesses making decisions that could impact thousands of people, the task of managing these risks becomes bigger.
Look at it this way: In daily life, you might take a really simple and basic risk. Let’s say you see something in an auction that you think is a bargain, and you think you could clean it and sell it on. This is a pretty small financial risk, but a risk nonetheless. It might pay off and you might make some money or, you might buy it and notice it is broken, fake, or not worth what you hoped.
Extrapolate this example into big companies making multi-million dollar deals and you’ll see why the decision-making process becomes so much more complex with many people involved. This is where a risk manager comes in. Risk management careers are all about trying to make the right decisions based on risks. Nobody can tell the future, but certain people are good at looking at data, trends, and patterns, and giving advice on the future of companies, and these people often look for jobs in corporate finance.
What Is a Risk Manager?
Let’s look into the job itself. What does a risk manager do?
Risk managers can work in various industries, including insurance, banking, and large companies and organizations. With that being said, a risk management job description can very depending on what the company or organization in question needs.
Ultimately, risk managers tend to be involved in the following aspects of business.
Identifying risks to companies. Risk managers identify potential risks by conducting risk assessments, analyzing internal and external factors, and evaluating the likelihood and impact of various risks on the organization's goals and objectives.
Assessing those risks and their potential impact. Risk managers assess the severity and potential consequences of identified risks to prioritize them based on their significance and likelihood. This involves using quantitative and qualitative methods to quantify risks and using data and modeling determine their potential impact on the organization.
Risk manager or risk analyst jobs may involve mitigation for risks too, as risk managers develop and implement strategies to mitigate or manage these risks effectively. This may involve implementing controls, developing risk management policies and procedures, transferring risks through insurances, or advising companies to avoid certain activities or exposures altogether.
Compliance and laws can also be a part of the risk management job description. Risk managers ensure that the organization complies with relevant laws, regulations, and industry standards related to risk management, governance, and internal controls. They may need to stay abreast of regulatory changes and developments to ensure that the organization's risk management practices remain up to date and in compliance with applicable regulations. This depends on the type of business, and certain types of companies have much more responsibility to stay aligned with rules and regulations.
Communication and stakeholder involvement can also be important. Risk managers work closely with various people, including analysts, senior management, department heads, internal audit, external auditors, regulators, and insurance providers, to ensure a coordinated approach to risk management and alignment with organizational objectives. Finance jobs aren’t just about crunching those numbers, and risk management professionals may need to discuss their role in detail and give advice on numerous scenarios.
Starting a Career in Risk Management
Lots of people are drawn to this career, for a variety of different reasons, too. The salary in the US can be very appealing, and there are over 14,000 people working in this field in the United States alone.
Senior Risk Analyst salaries in the United States typically range between $69,000 and $127,000
If this sounds like the kind of financial career for you, then there are many different steps to take to try and get to the pinnacle of the career. Like a lot of financial career paths such as risk analyst jobs and financial analyst jobs, this can be very challenging to get into.
Risk management roles are very skilled. People need to be able to work with data, as well as having a strong level of foresight and the ability to communicate effectively. When you are considering working in this field, it is a good idea to think about whether you have the skills needed, and if not, whether you are willing to work on gaining them.
Education Required as a Risk Manager
Many risk management positions require a bachelor's degree at minimum, preferably in finance, accounting, economics, business administration, mathematics, or a related field, which can show that you have a brain for finance and business matters. You'll still have options open if you study a finance subject, ready for a career in finance or investment banking.
Some employers may prefer candidates with advanced degrees such as a master's in business administration (MBA) or a master's in finance (MSF) with a focus on risk management or financial engineering.
A master’s degree can make a big difference when it comes to setting yourself apart as a top candidate for a job, and getting into risk management can be tricky, so it is worth taking every opportunity to get ahead.
Consider taking finance classes to learn more about risk management, as these courses will provide you with essential knowledge and strategies to identify, assess, and mitigate financial risks effectively.
Risk Management Certification
Depending on where you are based, careers in finance, including risk management may also involve certification.
Professional certifications can enhance your credentials and demonstrate your expertise in risk management. Consider pursuing certifications such as the Financial Risk Manager (FRM) offered by the Global Association of Risk Professionals (GARP), the Certified Risk Manager (CRM) offered by the National Alliance for Insurance Education & Research, or the Chartered Enterprise Risk Analyst (CERA) offered by the Society of Actuaries.
It is definitely worth considering where you are in your career and what you want to achieve when working out which certifications could be worth pursuing.
For instance, the Enterprise Risk Management Certified Professional (ERMCP) issued by the Enterprise Risk Management Academy (ERMA) is aimed at “experienced risk management professionals who have at least three to six years of experience and are looking to boost their ERM expertise and career progression.”
Internships in Risk Management
If you want to get into a risk management job then there is a chance that an internship could be your best option. It is a way to gain experience to understand what a risk manager does as well as the finance industry.
Participating in a risk management internship provides interns with hands-on exposure to real-world risk management practices, processes, and challenges within organizations. Throughout the internship experience, interns have the opportunity to learn valuable skills, develop industry-specific knowledge, and build professional networks that can pave the way for future career opportunities in risk management.
During risk management internships, interns typically work alongside experienced risk managers and professionals, assisting with a variety of tasks and projects related to identifying, assessing, and managing risks within the organization. Interns may be involved in conducting risk assessments, analyzing data, developing risk management strategies, and implementing risk mitigation measures.
One of the key benefits of risk management internships is the opportunity for interns to develop and refine a wide range of skills that are essential for success in the field of risk management. Interns learn how to conduct thorough risk assessments, analyze and interpret data, communicate effectively with stakeholders, and collaborate with cross-functional teams to address risk-related challenges.
You’re more likely to see the inner cost of goods sold of a risk management company and the way it works by taking on an internship.
Skills to Become a Risk Manager
Every job comes with its own unique set of skills that are required. So, if you want to become a risk manager, what are the skills in question?
If you want to work in this area, then you should either already have an aptitude for these areas, or at least be willing to work on them.
- Analytical skills: Risk managers need strong analytical skills to evaluate complex data, assess risks, identify patterns, and draw insights that inform decision-making processes.
- Quantitative analysis skills: Proficiency in quantitative analysis is essential for risk managers to quantify risks, conduct risk modeling, perform statistical analysis, and calculate risk metrics such as value-at-risk (VaR) and risk-adjusted return on capital (RAROC).
- Problem-solving skills: The ability to solve problems creatively and develop innovative solutions to mitigate risks and address risk-related challenges is part of the daily role of a risk manager.
- Financial knowledge: A solid understanding of financial concepts, accounting principles, and financial markets is essential for risk managers to analyze financial data, assess financial risks, and evaluate the financial implications of risk management decisions.
As well as working to improve these skills through degrees and studying in a formal environment, there are a lot of other opportunities for people who want to gain skills they can use in a risk management career.
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