Working in risk management

Risk management in the financial sector involves managing exposure to risk, whether it is in-house or on behalf of an external client. This includes analysing likely risks and devising and implementing strategies to minimise or avoid them. It 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.

Work in risk management is 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 careers 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.

Qualifications for a career in risk management

A degree in finance, business, maths or accounting is generally required for a career in risk management. 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.