The Roles of Financial Risk Managers

Estimated reading time: 3 minutes


An increasingly important position

In the world of finance, success only comes when one embraces risks. Warren Buffet, an accomplished investment expert, points out that the key to controlling money is first to master individual emotions.

And that’s precisely what a risk manager does; they can analyze a company’s financial situation and offer solutions without relying on emotion but cold facts.

Financial risk managers are in demand more than ever in today’s volatile financial climate.

Global banking reforms have played a part in fueling the demand for FRMs.

It is important to note that even with the advancement in fintech, it is expected that risk managers will enjoy job security for a very long time to come.


The most valuable skills

Foreign companies are venturing abroad in larger numbers than ever, and that’s where an experienced risk expert will come in handy.

These firms can pay top dollar for a risk manager that can help the company navigate statutes to enjoy the same competitive advantage as the local players.

Another invaluable asset is being able to correctly analyze a company’s financial status and offer practical solutions that lead to growth and minimal losses.


Being tech savvy

Indeed, the technology is there, but a human is still needed to take advantage of the available tools. At present, human resources are scarce because the tech has yet to reach the level of being fully autonomous.

Some firms will use risk management software such as Endur, Allvue Systems and many other niche applications, but more prominent companies will opt for a customized setup.

That is when a tech-savvy individual will always be offered the opportunity to build robust and reliable in-house software that’s better than industry standards.

Remember that fintech companies face endless risks that may lead to bankruptcy if not mitigated professionally.

Gone are the days when players relied on existing infrastructure; today, companies are building their own quantitative trading systems from scratch. The success of such systems relies partly on the risk manager’s guidance.

It’s not just enough to know how to use the applications, but one is required to be a creative problem solver with the know-how to build custom financial solutions.

These professionals are tasked with heading departments that brings together big data experts, and other professionals to carry out research and produce a financial product that’s aimed at properly managing the risks of a company.

The roles have become a mix of theory and practical applications.


Within the banking industry

Banks are in the business of taking risks; for example, they offer loans with a probability that the recipient may default later on.

This becomes a hazardous affair when development-oriented institutions lend to foreign governments.

There have been instances where a country defaults on a loan, which ends up being written off.

The role of a risk manager in this case is to analyze the scenario in order to offer insights that will prevent or manage a default.


Within the investment sector

These professionals will identify lucrative investment opportunities whose risks can be managed. On a larger scale, the role will entail facilitating mergers, acquisitions, and expansions into new markets.

For a long time, statistics have maintained that 90% of startups will fail; those that succeed usually consult experts on the type of funding offers to take, how to go about expansions, and exit plans.

On a smaller scale, the finance officer will have many duties from accounting to risk assessment. They may be tasked with matters of reviewing contracts and other aspects that affect the company’s financial health.


In the world of research

Apart from being invited to talk about about finance, FRMs are the principal consultants in case of a financial crisis like the 2008 crisis.

Some of these assessors may even write books and teach courses that are used as models to solve emerging problems.

After reading, they are able to identify areas that need streamlining to control losses, increase profits and find better ways to invest a firm’s income.


In conclusion

Finance Risk Management can be a lucrative career choice, depending on one’s experience (and location) in the game.

However, more pay will mean more challenges at work, where a company’s future may rest on an individual’s prowess.

The most important roles are creating positive change and impacting those working around them. Do you think you can fill the position?


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