Risk management may also encompass some compliance work. It is a growing area in the finance industry, as financial and non-financial organisations alike become aware of the part that risk management can play in their long-term financial strategies.
Risk management positions are available across a range of employers, from banks and insurance companies to the public sector and property firms. Some industries have in-house functions, while others outsource to consultancies and banks. Risk management functions may be known under different names, such as risk control, and can form part of a bank’s treasury services.
What will I do?
There are several areas of specialisation in risk management based around five different types of risk: credit (eg a creditor won’t be paid), liquidity (eg there is insufficient cash flow to meet obligations), legal (eg not fulfilling legal requirements or misinterpreting contracts), operational (eg breakdown in corporate governance) and market (eg the institution will lose money from bad trades).
Consultancies, banks and insurance companies usually offer traineeships with graduate schemes, and graduates gain general business experience before specialising.
A degree in finance, business, maths or accounting is generally required. A number of postgraduate courses in financial services include modules on risk management.
Know your terminology
Hedging is a term used to describe risk management strategy whereby risk is reduced but a business still profits from investments. This might include balancing an investment into a changeable market with ‘short selling’ – selling assets while their price is high and buying them back when their price is reduced.