Since the global financial crisis, bankers and corporate decision makers have been pilloried for taking excessive risks. As investors, shareholders, regulators, and the public increase their scrutiny of financial services and corporate practices, risk management professionals have come to the fore.
Nobody likes surprises, especially bad ones. They can be costly or worse, detrimental to a firm’s survival. Risk management professionals are there to identify potential problems, assess their impact, and mitigate them. After the global financial crisis, they play an important role in maintaining a healthy balance between risk taking and profit making: How far should a firm go to earn profit without endangering its assets and those of its shareholders?
The global financial crisis and scandals such as LIBOR-rigging have led to a hiring spree in the middle and back offices, specifically in compliance and risk management roles. These functions have become critical as firms start rebuilding their reputations and complying with a growing number of regulations. “Any time there is scrutiny on the performance of an organization, there is a lot of investment in headcount in compliance and risk,” says Sharmini of Michael Page. “If you can join a risk management team — whether operational risk or credit risk — you can do very well and there is a clear progression path within investment banks for that specialty.”
Risk management professionals need to have a clear picture and understanding of what’s going on in the areas they look after in order to anticipate problems and put a plan in place for when bad things happen. They need to communicate their assessments clearly and promptly with other parts of the firm and work closely with compliance, audit, operations, and other departments.
Risk management is a broad area; some specializations in the financial services industry are market risk, credit risk, and enterprise risk. Market risk professionals look after the effects of various market factors, such as interest rates or foreign exchange movements on asset portfolios. Credit risk focuses on lending activities, such as the ability of a borrower to repay a loan, whereas operational risk covers fraud or financial wrongdoing within a firm.
Efforts to curb excessive risk taking following the global financial crisis have resulted in a wave of regulations. As financial services firms and corporates comply with these regulations, risk management professionals will remain in demand with excellent analytical, quantitative, and communication skills are essential.