The Life of a Risk Manager after Completing the FRM Examinations

Estimated reading time: 11 minutes

 

Introduction

The life of a Risk Manager varies greatly and is influenced by many factors.

Factors such as the country being worked in, the firm that one is employed in, the size and corporate nature of the institution, as well as the actual position being occupied within the firm are all considerations for you to ponder.

The major risk segments are Market Risk, Regulatory Risk, Credit Risk and Operational Risk and individuals tend to specialize in a single category for their employer over time.

 

The Required Background

Financial Risk Managers often pride themselves with the fact that many of them possess a strong academic background within mathematics or economics in addition to having an analytical and inquisitive mind that fuels financial curiosity.

These individuals will carry strong project management skills and exceptional communicative skills in order to shed light on complex financial matters.

Any person interested in this area of finance will need to familiarize themselves with many hours of researching and studying but also the many various laws and regulations that govern the financial industry.

Regulations such as Basel and the Dodd-Frank literature will often present themselves numerous times in many financial risk cases.

Candidates should also expect to familiarize themselves with analytical risk software or econometric modelling in the likes of ARM, SAS and SAP- as one of the primary pillars in risk management deals with the proper identification of risk through performing statistical analysis.

 

Qualifications

Risk managers tend to have background bachelor degree qualifications in economic or mathematics and, in addition to this, they tend to work their way up from starting positions within the financial industry.

Nevertheless, more educational institutions are increasingly offering programs geared towards financial risk management as options within their MBA or MSc courses.

A case in point is the Duisenberg School of Finance in Amsterdam that is credited with having one of the oldest running full-time risk management programs in history.

There is also the renowned Stern Business School at NYU (New York University) that offers an MSc in Risk Management for executives.

Interestingly, as one of the top universities in the world, Stern Business School has actually partnered with the Global Association of Risk Professionals (GARP®) to aid students to advance themselves in the profession of the risk management discipline and to achieve the globally recognized Financial Risk Management FRM designation.

 

Salaries 

Managers who have completed the GARP examinations and risk professionals in general have seen an increased demand for their talents in recent years, particularly after the 2008 financial collapse that affected many economies and countries the world over.

Local banks, central banks, financial institutions and governments alike have all sought the knowledge and expertise of professional risk practitioners in order to gain a better understanding of the types of financial risks that are present in their respective environments and many have paid out generous sums to have this achieved.

Depending on experience and background qualifications, financial managers may expect to earn salaries of around US$100,000 to US$200,000 excluding bonuses and other perks.

Additional benefits may include pension benefits, health insurance, life insurance and even paid vacation time, so be sure to have a proper negotiation session before signing up with any company!

This life can be stressful so be sure to receive proper compensation for it!

After much research, we have gathered a list of items and put together a scenario that one may face within the working place when dealing with the day-to-day life of a Risk Manager.

You may see varied descriptions being used such as risk technicians, risk directors or risk surveyors but there are commonalities that bind the risk profession together and we trust that this article will shed some light on the subject matter.

We encourage you to reach out to those who may have already been working in your area of interest or those who are currently employed to a position that you may find interesting.

 

The Working Environment 

Characterized by long working hours (45+ hours per week) and pouring over excel spreadsheets, MS Word documents, Power Point Presentations and specialized risk management software, those who are employed as risk professionals find themselves examining and dissecting probable risk scenarios that could possibly present themselves and impacting the operations of the firm negatively.

Much of these hours will be spent looking at a computer screen or several computer screens in a formal office environment.

Option pricing, hedging, derivatives and the Capital Assets Pricing Model- do these sound familiar?

Statistical modelling, valuation techniques and quantitative analysis make up the lifeblood that flows through the risk department.

Countless hours will be spent in going over the financial statements of companies, conducting research activities in groups and on one’s own initiative and making every effort to understand the inner workings of the financial economy as well as the wider macro-economic conditions at home and abroad to ensure that the absolute best decisions are made to protect the stability and profitability of the company.

Those professionals in this field will find themselves arguing and debating the various ways in which risks may be identified, analyzed and determining the subsequent strategies to cope with the various types of financial risks.

Maintaining the integrity of risk databases, monitoring various risk indicators and presenting findings and suggestions are all part of the professional risk management life.

Actual activities may include:

  • Reviewing new and existing business contractual agreements
  • Preparing budgets and allocating costs to departments
  • Analyzing and preparing methods to show probable financial impacts to firm
  • Aiding in the claims process to ensure consistency and fairness
  • Maintaining risk records for impact analysis

 

The Downsides

One of the most significant reported downside to selecting a life revolving around financial risk is the many hours that one will have to commit to in order to be successful in the field.

Back-to-back deadlines are almost a staple within the risk environment and will directly manifest itself in time away from one’s family, friends and maintain a healthy social life.

The life of risk management also sees travelling as a necessary requirement and, depending on the size of the employer, may cause much wear-and-tear to any individual.

The high-pressure environment of the risk management is compounded by the fact that the slightest error in input may result in devastating outcomes for the firm.

Tediously going over scenarios, input parameters and re-checking many details will become the norm for such professionals- and all this translates into time away from the family.

This is not to say that single or unmarried individuals are best for the job- it is just a stark reminder of the sacrifices that one will be called upon to make.

 

General Work Areas

Due to the nature of the job and what it entails, such managers are often located near or around the business districts and urban environs within the country that you are working in.

It should be understood that those countries with cities that are much larger in size and more financially developed will present themselves with more work opportunities than those smaller districts and cities.

 

A Day in the Life

 

5:15 am:

The start of a new day filled with potential and possibilities in the world of risk! This point in time for the Risk Manager is an extremely important one as it sets the tone for the rest of the day.

While the average person will jump to check his or her smart phone and jump right into the hustle and bustle of life, it is here that performers tend to focus on only two things- the mental and the physical.

For the mental aspect, the elite will do meditation exercises, focusing on mental conditioning and self-reinforcement techniques through positive affirmations and similar routines.

For the physical dimension, the high-performer will perform some type of physical exercise in order to get an elevated heart-rate and blood flowing at a more vigorous rate.

Some may prefer strength training while others will always choose cardiovascular techniques, but those aiming for the pinnacle of success will do both.

Rounding off the physical aspect involves proper nurturing of the body. Here, we see the successful individual reaching for wholesome and nutritious foods and not carbonated or sugary drinks.

Blended fruits and vegetables for their high vitamin and mineral composition is typically a favorite.

When both the mental and physical aspects are routinely grounded in one’s life, particularly in the early morning hours, that individual will often be less stressed than his or her peers.

Additionally, he or she will possess more energy to power through the entire day and will have a mental focus and clarity that many desire but only a few will achieve.

 

6:20 am:

After a great sweat-inducing workout, the Manager will hit the shower in order to relax the muscles and clear the mind.

Fun Fact: Many individuals all over the world have reported that some of their best ideas in life and business came to them while showering (and even resting in bed) after having their morning workout.

 

7:45 am:

Settling down at the office, the formal aspect in this professional life officially starts.

At this point in time, the RM will more-purposely check the emails and get up-to-date on what is happening in the office and around the world.

Here, high performing Managers will carefully dissect the flood of information constantly being thrown around before skillfully selecting those items that are deemed truly important and warrant his or her attention.

Yes folks, the day’s ‘To-Do List’ has been born.

The manager will separate those items that require immediate attention and those that must be completed by the end of the day.

Meetings are marked and checked off, voicemails are returned and emails are answered. Any item that was carried over from the previous day or week is dealt with promptly before they become unnecessary emergencies.

The management of financial risk is the central theme for the department’s activities. As such, the identification of risk, its extent and treatment are all critically important each step of the way.

The reviewing, updating and development of risk policies and procedures are constants in this professional life. 

His or her emanating ideas will come to the forefront and these are needed to be adequately expressed to the supervisors before going to the firm’s internal directors, Committees and Board.

 

9:30 am:

Any outstanding matters will have to be looked at and dealt with in the appropriate matter.

Work-related items that may be shared and communicated with the appropriate persons and research material needed are requested of the assistants and analysts.

Continuation of a power point presentation is done and the final finishing touches are made before a mock presentation is performed.

The RM checks that all emails sent requesting a meeting confirmation have been answered and all are in the affirmative.

 

10:30 am:

At this point, time is needed to review some of the recommended and up-to-date financial literature that shares information on the latest statistical techniques that will improve the understanding of risk, its detection as well as new suggested ways to manage risk.

One will also update himself or herself with regards to updated methods on how to present the analytical findings in a way that will be much more effective and efficient for the members of the risk committee and the Board.

This, as reports will have to be not only extremely informative, but they also need to be concise enough for proper understanding and digestion.

In addition to the aforementioned, taking time out to update oneself with regards to the latest laws and regulations that may impact the risk exposure of the firm is also of paramount importance.

This, particularly when firms have financial exposure, not just to the local economy, but to several other economies around the world.

 

12:30 pm:

A meeting for updating the investment policy has concluded and management have signaled their approval of the proposed changes and suggested further review and modification of other areas to be had.

Quick chats with a few of the managers ensue and some outstanding items had to be dealt with after getting the required approvals.

Stopped by the research desk and requested data on two companies being considered as partners on an upcoming project.

 

1:30 pm:

The Manager goes out for lunch and took the opportunity to stretch the legs after sitting through another meeting.

A light-to-medium medium sized meal has been ordered and consumed. Having too much of a large meal will cause mental fatigue and slow the decision making process considerably.

A pass on sugary drinks here. It is favored to have a natural fruit beverage by the popular heath bar near the office building.

 

2:30 pm:

The Financial Research Manager goes into another meeting with Human Resources to help select a short-list of Risk Analyst vying for two newly created positions within the firm.

Six candidates have been selected and will be contacted as to when to come by for interviews. The selection day has been set and the calendar has been marked off as ‘busy’ for most of the day.

 

3:45 pm:

Several emails received during the day are looked at and answered.

A phone call has been made to the manager of another firm who is seeking assistance in handling some risk matters that unexpectedly came up for them.

 

4:50 pm:

Continued working on another power point presentation that has to be made for the Risk Committee.

In addition to this, time had to be allotted towards revising several projects that may be undertaken by the firm.

Studying and analyzing these projects are an on-going activity as new business inflows must be a continuously sought-after action to increase the profitability of the company.

Nevertheless, selecting which business projects are to be green-lit from a risk perspective is an extremely important activity and such decisions could make-or-break the firm’s financial prospects.

 

6:50 pm:

All the various other departments in the firm have to be given their own specific time in terms of properly assessing their level of risk exposure.

They also suggest ways in which they could better manage whatever risk exposure they face.

 

7:30 pm:

The Manager decides to take an earlier-than-usual leave and head out to the gym for a quick workout.

He or she knows that the rest of the week may become unusually hectic, in addition to seeing news of an impending snow storm heading that way later during the week.

 

In Summary

We thank you for reading and sharing our article on the Life of a Risk ManagerWe hope that you have enjoyed reading it as much as ewe have enjoyed researching and writing about it.

Please let us know if there are any other interests that you will like to see us write about and feel free to browse through more of our articles!

 

See you soon,

The QuestionBank Family