A financial risk analyst, also known as a financial risk manager (FRM), has two principal roles with an organisation.
What does a financial risk analyst do?
First, as the title suggests, identifying and analysing the financial risks that their employer faces. Second, proposing strategies to counteract those risks and allow the business to continue operating profitably. The risks fall into four categories: credit, market, operational and regulatory.
Financial businesses, such as banks and insurance companies, are required by law to conduct daily risk management. This level of pressure has foregrounded the role of the financial risk analyst.
What kinds of financial risks analysts are there?
Like most professional careers, becoming a financial risk analyst involves making choices about the type of role you want to undertake. In financial risk analysis you have four principal areas. Whether you call yourself a financial risk analyst or a financial risk manager, you will choose between credit, market, operational and regulatory risk analysis.
- Credit risk analysts look at the risks of customers not paying for the goods or services they’ve ordered or defaulting on loans made to them
- Market risk analysts identify how factors beyond the institution’s control could affect the share price of its ability to conduct its business
- Operational risk analysts work in the area of internal factors, from catastrophic IT failures to employee crime
- Finally, regulatory risk analysts assess the likely effects of new legislation.
How to enter the world of financial risk analysis
Unlike some business careers, becoming a financial risk analyst doesn’t always require a degree or an HND. However, in those cases, substantial commercial experience and professional qualifications will be required instead. For that reason, a relevant degree is a shortcut to the profession of risk analyst.
Degree subjects that may provide an advantage in terms of access to the better jobs in risk analysis include accountancy, economics, finance, law and statistics. Better yet would be a specialist risk management degree.
As a risk analyst, you can expect to find yourself working for organisations including banks, insurance companies, investment firms and large industrial or commercial organisations. The areas of operation that call for financial risk analysts range from sales, origination, trading and marketing to financial services and private banking.
What makes a good financial risk analyst?
As you might expect, to become a successful financial risk analyst or financial risk manager, the number one skill is a high level of numeracy. To dig down a little deeper, that means a familiarity with the full range of mathematical operations and the confidence to undertake sophisticated statistical analysis.
But many of your future colleagues, particularly as you go further up the management hierarchy, will not be as numerate as you are. Therefore, you will also need the ability to present complex mathematical concepts in straightforward terms so colleagues understand the risks they face and the solutions you have developed.
Financial risk analysis is a highly pressurised role, with banks and other financial institutions under record levels of scrutiny from shareholders, non-profits, regulators and the media. Alongside the technical skills, you will need a rigorous and unbending commitment to the highest standards of professional ethics.
As a qualified financial risk analyst or FRM, you can expect to earn a good salary in the range £29,000 to £74,000 according to discoverrisk.co.uk.
Related courses at City
Whatever your level of interest in becoming a financial risk analyst, City's courses can help you take one step closer to a career, develop specialisms that'll set you apart from the field or broaden your horizons with study in related subjects.