Ñî¹óåú´«Ã½

Financial risk analysts combine commercial awareness with strong communication skills to identify and assess potential risks to a project or business

As a financial risk analyst, you'll identify, assess and monitor potential risks that could threaten the assets, earning capacity, or overall success of an organisation. This may include risks related to credit, markets, operations or compliance. You'll also be responsible for predicting future trends and estimating potential costs to the organisation.

Financial risk analysts work in areas such as trading, sales, investment management, private banking, or corporate finance.

Types of financial risk analyst

There is a high level of specialisation within the profession, and you may work in one or more of the following areas:

• Credit risk - assess the risk of financial loss if customers or counterparties fail to meet their payment obligations, such as defaulting on loans or not paying for goods and services.
• Market risk - evaluate the potential impact of external factors, such as interest rate changes, currency fluctuations, or shifts in market sentiment on the organisation's investments or financial position. Analysts typically work closely with traders to assess the risk of specific trading activities.
• Operational risk - analyse the likelihood and impact of internal failures or disruptions, including system outages, process errors, and employee misconduct or fraud.
• Regulatory or compliance risk - examine the potential effects of new laws, regulations or policy changes on the organisation, ensuring compliance and minimising legal or reputational risk.

Financial institutions especially, are required to actively manage market and credit risks on a daily basis, and analysts are increasingly expected to work across multiple risk areas to support integrated risk management.

A related role is that of a credit analyst, who focuses specifically on assessing the creditworthiness of borrowers and the likelihood of repayment. Many consider risk analysis to be a broader, more advanced extension of credit analysis, encompassing a wider range of financial exposures.

Responsibilities

As a financial risk analyst, you'll typically need to:

• recommend strategies to reduce or control risk, including insurance planning
• work with traders to calculate the risk associated with specific transactions
• liaise with underwriters and insurers
• forecast and monitor market trends
• consider proposed business decisions
• conduct research to assess the severity of risk
• conduct statistical analysis to evaluate risk, using software such as SPSS and SAS/STAT
• review legal documents
• present ideas via reports and presentations, communicate findings, and recommend improvements
• purchase insurance
• analyse a bank's market position and apply complex modelling techniques to determine value at risk (VaR)
• carry out quantitative analysis
• use financial packages and software, including portfolio management software
• study government legislation, which may affect a company, and advise on compliance
• protect the organisation's assets and public image
• develop contingency plans to deal with emergencies.

Salary

• Starting salaries for risk technicians typically range from £25,000 to £30,000.
• Risk analysts with up to five years' experience usually earn between £35,000 and £50,000.
• At senior/management level (with seven to ten years' experience), you can expect to earn in the region of £55,000 to over £90,000, though this can be higher in London.

Salaries vary depending on your experience, location and the size and sector of the organisation.

Most organisations also offer benefits packages, including bonuses which can increase your overall income.

Income figures are intended as a guide only.

Working hours

Working hours typically include regular extra hours, although not weekends or shifts.

What to expect

• The work is mostly office based, although you may need to travel to visit other organisations.
• Jobs are mainly concentrated in cities and large towns.
• With considerable experience, you can set up as a self-employed or freelance financial risk consultant.
• The job involves working under pressure to meet deadlines.
• There may be opportunities to work overseas, particularly if you're employed by a large international company.

Qualifications

Although you don't need a degree to enter the profession, many financial risk analysts are graduates. The following subjects may increase your chances:

• accountancy
• economics
• engineering
• finance
• insurance
• law
• mathematics
• risk management
• statistics.

Employers generally favour degrees in finance, mathematics or statistics. Most specific degrees relating to financial risk management are at postgraduate level, but some courses are available at undergraduate level. Bayes Business School, for example, offers an .

Entry without a degree or HND may be possible, but larger employers tend to prefer graduates. Without a degree, you'll need experience in finance or insurance, along with professional qualifications.

A postgraduate qualification, such as an MSc in financial-related risk management or financial markets, can improve your employment prospects, particularly if your degree is in an unrelated subject.

Search postgraduate courses in financial risk management.

You can also get into financial risk analysis through a graduate training programme or apprenticeship, which are run by many of the larger finance organisations, such as Aviva, Lloyds Banking Group and Kaplan.

The professional body the Chartered Insurance Institute (CII) provides a range of information about about .

Skills

For this role, you need:

• strong numeracy, analytical and strategy skills
• good research skills
• planning and organisational skills and problem-solving ability
• IT competence and computer literacy
• negotiation skills
• good written and oral communication skills
• the ability to explain complex issues and present technical information clearly
• commercial awareness
• the capacity to work independently and cope with pressure and responsibility
• a professional approach to work, integrity and respect for ethics
• the confidence to relate to a range of people and to challenge people when necessary.

Work experience

Pre-entry experience in a finance or insurance setting is useful. General commercial business experience will also be an advantage.

Look for internships, placement years or work shadowing opportunities in risk, finance or data analysis functions.

Find out more about the different kinds of work experience and internships that are available.

Employers

Risk is a growing area of employment with good career prospects. You can work for a range of organisations, predominantly in the private sector.

Opportunities exist in the risk management departments of:

• investment companies
• insurance companies
• banks and other financial institutions
• other medium to large-sized commercial and industrial organisations.

Competition for jobs is usually intense. Enhanced regulations and a more risk-conscious banking sector means organisations are investing more heavily in their risk functions, creating more jobs in this area.

Self-employment or freelancing is an option once you've gained considerable experience and developed expertise.

Look for job vacancies at:

Professional development

Training is typically on the job and involves a mix of in-house and external courses.

Graduates on a risk graduate scheme will usually spend 12 to 18 months getting experience across the different risk functions before specialising in a particular area, such as risk analysis. This breadth of training provides you with an understanding of the whole range of risk functions.

Financial risk analysis is constantly evolving, so you'll need to undertake continuing professional development (CPD) to keep up to date. Employers will often support you in taking relevant examinations leading to industry-recognised qualifications. These include:

• - financial Risk Manager examinations leading to financial risk manager (FRM) certification
• - programme leading to the chartered financial analyst (CFA) credential
• - the International Certificate in Financial Services Risk Management, and the International Certificate and Diploma in Enterprise Risk Management
• - a range of insurance and financial planning qualifications.

To gain certification with GARP as a FRM, you'll need to pass a two-part exam and have a minimum of two-years' full-time work experience in finance or a related field (e.g. risk consulting, auditing, trading). Once you've gained FRM certification, you're encouraged to undertake GARP's CPD programme to further develop your skills.

Many professionals choose to undertake both the FRM and CFA certification, demonstrating their combination of risk and financial management expertise.

Career prospects

There are good career prospects in the field of risk analysis. Progression rates and routes vary according to the type and size of employer you work for, and you may need to move between organisations to progress. There may be a more structured career route in large organisations with opportunities, for example, to move into a management role.

A typical career path in a large financial institution might be:

• credit risk analyst
• senior credit risk analyst
• risk manager
• senior manager or managing director.

Risk consultancies offer the opportunity to move into the lucrative area of consultancy and many offer graduate programmes in risk management.

Opportunities also exist to move from risk into more general finance roles.

Corporate governance initiatives and a more restrictive and expensive insurance market have given risk analysts a higher profile within organisations. The importance of the role of risk professionals is increasingly being recognised, with risk managers gaining places at senior management level and as board members.