5 Steps to Start a Career in Financial Risk Management

With the growing need for financial risk management in every industry, pursuing a career in financial risk management can offer you diverse opportunities and a good salary range. A Financial Risk Manager (FRM) may be the career for you. A role in risk management may involve running reports, approving new trades, handling regulatory requests, and running ad-hoc quantitative analyses for managers. Later on, you develop intuition and make judgement calls on trade risk and portfolio management.

FRMs can find job prospects in financial institutions, investment institutions, credit rating agencies, banking sectors, energy companies, and even the IT and Fintech sectors. As an FRM, maintaining a specific code of conduct and ethics is essential as people will entrust their financial future to your hands.

If you’re looking to start a career in financial risk management, here are some steps to help you get started:

Step 1: Get an Education

A degree in finance, economics, mathematics, statistics, or a related field is an excellent starting point for a career in financial risk management. However, a degree alone may not be enough to stand out in a competitive job market. Consider pursuing additional certifications, such as the FRM designation, recognized globally.

A solid understanding of statistics is essential for risk management, as a lot of it involves looking at correlations and modelling potential scenarios.

In addition, MIS (Management Information Systems) majors with skills in R, Python, SQL, and Power BI are well-suited for a career in Financial Risk Management, significantly if they can leverage their degree to support risk management initiatives.

Step 2: Earn Professional Certifications

Consider obtaining professional certifications to demonstrate your commitment to the financial risk management profession and enhance your job-specific skill set. Some of the most in-demand financial risk management certifications include:

1. The Financial Risk Manager (FRM) designation, offered by the Global Association of Risk Professionals (GARP), is recognised globally and demonstrates expertise in financial risk management.
2. The Chartered Financial Analyst (CFA) designation, offered by the CFA Institute, is globally recognised and demonstrates expertise in investment management.
3. The Professional Risk Manager (PRM) designation, offered by the Professional Risk Managers’ International Association (PRMIA), is recognised globally and demonstrates expertise in risk management.

Step 3: Gain Relevant Experience

Relevant work experience can significantly improve your job prospects in financial risk management. Consider seeking internships, entry-level jobs, or volunteer work to gain hands-on experience. You can also join financial risk management clubs and participate in networking events to meet other professionals in the field.

Step 4: Polish Your Financial Risk Management Skills and Build Your Network

To succeed in market risk, it is essential to have strong intuition and question everything. You should be able to analyze reports and make informed decisions about trades, understand the potential risks and losses that may occur, and develop an intuition for assessing the current portfolio and the markets.

You must have strong quantitative skills, knowledge of programming languages such as R or Python, and proficiency in Excel and VBA. A background or interest in psychology can also be beneficial, as risk management involves understanding and quantifying human behaviour, including why people might make illogical decisions or lie.

Step 5: Find Your First Financial Risk Management Job

Landing your first financial risk management job can be challenging, but with the right approach, you can succeed. Some things you can do to increase your chances of getting hired are:

1. Start by looking through all the open positions in risk from the different banks in the area you wish to work: This will give you an idea of the requirements and experiences needed for a career in financial risk management.
2. Look up on LinkedIn some people with titles/positions that are of interest to you and engage them: You can ask them how they got to that position and learn from their experiences. You can also look up alums from your school who work in the field and ask for their advice.
3. Reach out to your professors: They may be aware of positions, internships, or people in the field who can provide valuable insights.
4. Networking is vital: The job market is all about interpersonal networking. Knowing or talking to someone doesn’t guarantee a job, but it will make the chance of your resume being read by the hiring manager much higher.

Specialisations

There are different areas of risk management. Some of these opportunities are:

• Market Risk Management
• Credit Risk Management
• Operational Risk Management
• Enterprise Risk Management

The salary range for financial risk management professionals depends on various factors, such as experience, location, and industry. As you gain more knowledge and skills, you can expect to earn a higher salary.

Conclusion

While technology is increasingly being used in financial risk management, some aspects of it, such as subjective assessment and risk modelling, still require a human touch. It’s important to note that the specific area of risk management will vary significantly with credit, market, liquidity, and operations. Each of these areas will require different skill sets and offer different experiences. Therefore, it’s crucial to research and understand the specific area of risk management you are interested in before pursuing a career in this field.

By following the steps outlined above, you can set yourself up for a successful career in financial risk management.