By Dr Eugene Brink
With all the hurly-burly and rapid changes in the economy and business environment, measuring financial risk is a big priority nowadays.
That’s why organisations appoint specialists called financial risk analysts to advise them on this topic. “Risk Analysts work closely with the organisations to check the financial risks, i.e. from company costs to investments and focus on reducing the unnecessary costs incurred. These professionals usually work for investment firms, banks, insurance companies, accounting firms, and more,” writes Ingrid Horvath for Invensis Global Learning Solutions.
“Risk analysts consider the current market scenario and make necessary predictions regarding the company’s future considering the previous and current economic trends. Some of the potential risks include the costs of location, chances of robberies, employee injuries, and more.”
The University of London describes it as follows: “Risk analysts consider the current market scenario and make necessary predictions regarding the company’s future considering the previous and current economic trends.”
Activities and skills
Financial risk analysts typically analyse and anticipate market trends. Hence, they conduct research to assess risks and calculate the risks involved in transactions and business proposals. They assist the company in reaching their financial objectives. Finally, they advise on precautions and improvements. “Some of the preventive measures include identifying the ways through which the company can cut the costs involved without hampering the productivity of the organisation,” says Horvath.
The skills required are technical and interpersonal by nature. Superb numeric and statistical dexterity is vital. These skills firstly include possessing good knowledge of technical tools such as financial, analytical, accounting, and statistical tools. They should have a firm grasp of bank regulation and different categories of risk. Understanding and using complex modelling techniques and financial models are essential. Their findings must also be communicated through presentations and reports while their decision-making must be near-perfect in terms of managing risk right and at the right time.
It almost goes without saying, but good communication and negotiation skills are a prerequisite. “Many of your future colleagues, particularly as you go further up the management hierarchy, will not be as numerate as you are. Therefore, you will also need the ability to present complex mathematical concepts in straightforward terms so colleagues understand the risks they face and the solutions you have developed,” according to the University of London.
Financial risk analysts are grouped into four risk categories:
- Credit risk analysts examine whether customers will be paying for the goods or services they purchase or default on loans made to them.
- Market risk analysts consider how external factors such as interest rates and the cost of commodities affect the financial performance of the company. “These professionals work closely with financial firms to assess risks and return. They make use of an analytical approach to analyse the market risks and guide the team to monitor and control the risks,” says Horvath.
- Operational risk analysts, on the other hand, focus on the internal factors, from IT failures to employee crime.
- Regulatory risk analysts look at how legislation might impact the organisation’s operations.
Gradireland, 2021, “Financial risk analyst”, https://gradireland.com/careers-advice/job-descriptions/financial-risk-analyst.
Ingrid Horvath, 17 July 2021, “Roles and Responsibilities of a Risk Analyst”, https://www.invensislearning.com/blog/risk-analyst-roles-and-responsibilities/.
University of London, 2021, “How to become a financial risk analyst”, https://www.city.ac.uk/prospective-students/career-development/pathways/how-to-become-a-financial-risk-analyst.