Posted By: Kaplan Schweser
Published: February 26, 2019
With the Financial Risk Management (FRM®) designation, you have a credential that can set you apart in the financial services industry. Many of the top financial firms employ FRM certificate holders because they are seen as having attained the “gold standard” of the industry. But, what kind of jobs are available to you and where? Let’s take a look.
The recent well-publicized problems at a large US bank has led at least one industry expert to encourage major retail, commercial, and investment banks to hire more risk experts. However, FRM professionals are not limited to banking. According to GARP, which administers the FRM Exam and designation, Certified FRMs are also currently employed internationally at nearly every major asset management firm, hedge fund, consulting firm, and regulator in the world. Certified FRMs are most likely to be risk analysts, risk managers, credit risk analysts, market risk analysts, regulatory risk analysts, operational risk managers, or chief risk officers.
Risk analysts use analytical skills and knowledge of international business and currency markets to examine investment portfolios and analyze the risk involved. They project potential losses and recommend ways to limit risk through diversification, currency exchanges, and other investment strategies. Some also identify and report on asset losses, monitor investment trends, and aggregate data for analysis and reporting. Risk analysts are most commonly found in banks, insurance companies, mortgage firms, and consulting organizations, but some publishing houses and software development companies also hire them.
Risk managers help a business identify and assess potential risks that could affect them in the future. Many are responsible for analyzing investment approaches, including asset allocation, hedge funds, and fixed income. Their main focus is zeroing in on potential threats to the assets, earning capacity, or success of a business.They use their research to forecast changes and trends that will impact the business, make recommendations on investment strategies, and help businesses develop plans to limit risk. Risk managers work in sales, origination, trading, marketing, financial services, and private banking.
Also called credit risk managers or credit analysts, credit risk analysts review and assess the financial history of a person or company to determine if they are a good candidate for a loan. Many factors can affect credit worthiness, and credit risk analysts must sift through them all to make their determination. They evaluate financial data, such as balance sheets and income statements, to determine the level of default risk. They also calculate financial ratios to help lenders make comparisons and prepare reports for both the client and the lender. Lending institutions like banks or insurance companies are the main employers of credit risk analysts, although some work for asset management companies, private equity firms, or rating agencies.
Also called market risk managers, market risk analysts use their knowledge of an industry or sector to research market trends and provide companies or investors with a comprehensive market assessment. The company or investor then uses this information to make decisions about investments and future ventures. To determine the probability of asset loss or reward from investments in their particular industry, market risk analysts review statistics, develop risk management systems, consult with securities traders, and present the results of their research. From banks to energy companies, almost all companies that buy or sell stocks or make investments hire market risk analysts.
Legislation and regulations can affect companies in certain sectors. Regulatory risk analysts study new and proposed laws to determine how they will apply to their firms and research the impact similar laws have on businesses in other regions, states, or countries. They model various possibilities and recommend or develop ways to ensure compliance. If there is a period for comment before laws are final, regulatory risk analysts often respond on behalf of their companies. The financial industry employs the most regulatory risk analysts, but they can also be found in healthcare, oil and gas, utilities, and engineering companies.
The Basel Committee on Banking Supervision describes operational risk as “the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events.” These losses can be caused by several factors, such as fraud, negligence, or machine and human error. Operational risk managers investigate the way an organization or business is run, look at the big picture, and fix or prepare for anything that might harm the company in the future. The goal is to mitigate as much risk as possible and offset financial losses. They often use statistical modeling techniques and threat assessment to ensure the financial controls in place are effective. Operational risk managers usually work in banks, but some insurance companies, asset management firms, consulting firms, software vendors, and retail giants employ them as well.
Chief executives make the strategic decisions that drive the success and direction of an organization. Although an FRM designation is no guarantee you’ll land in the C-suite, a significant percentage of Certified FRMs have worked their way up to this level as chief risk officers. These executives assess and mitigate significant competitive, regulatory, and technological threats to a company’s capital and earnings at the senior executive level. They implement policies to reduce operational risks and ways to minimize losses in the event a system or process is inadequate or fails entirely. Most large businesses and organizations today have an enterprise risk management program led by a CRO or equivalent.
Although earning the FRM designation does not guarantee you a job, it can make a difference when an employer is deciding between two otherwise equally qualified candidates. Passing the FRM Exam and earning the designation take hard work and dedication. It demonstrates to potential employers that you have a mastery of the important concepts in risk management. Therefore, companies are more likely to choose the candidate with the FRM designation. It’s a career move worth considering. Our FRM Exam prep study packages can certainly help you on your journey.