Are you doing quite well in Maths? You may not be the star but getting excellent marks, nevertheless. Are you good in the analysis of situations, say, in solving slightly complex problems in Science and Maths? Are you good in languages too, especially in English? Do you want to make a career out of these aptitudes and skills of yours? Risk Management could be a good option.
A Risk Manager, as the name suggests, assesses and evaluates risks. What kind of risks? Various kinds of risks in doing business such as – market risk, financial risk, foreign exchange risk, credit risk, and so on. Market risk: what if a product of a company is not bought by enough customers? Financial risk: what if the money invested in a project lead into a loss? Foreign exchange risk: what if the cost of import increases due to fluctuations in currency exchange rates? Credit risk: what if a bank loan given to a person or company is not repaid? Risk Managers assess and evaluate such risks and devise ways and formulate strategies to avoid the risks.
Why become a Risk Management?
Risk management in the financial world essentially is the practice that involves analyzing a project or an investment, identifying the risks associated with the act, and being informed of all the possible outcomes and forming policies to minimize the impact of potential losses and other risks. There are several risks that a company may be exposed to. Some of these risks are the following:
Business risk: In order to obtain its reward, business risks are almost impossible to avoid. To optimize this to the fullest, it is important to establish the company’s risk-to-reward ratio. Some types of business risks are economic risk, legal risk, quality risk, and political risk.
Financial risk: Financial risk is generally caused by fluctuation in the financial sector. Some factors that affect this are interest rates, stock prices, and various other economic factors. A few types of financial risks are liquidity risk and operational risks.
Investment risk: It is the difference between the level of uncertainty of returns on investment, as compared to the expectations of the investor. Some types of investment risks are inflation risk, foreign investment risk, and concentration risk.
International business risk: This is caused by unfavorable events occurring in international business operations. Changes in global economies and different objectives may cause such a risk. Examples of such a risk are political risk, cultural risk, and exchange risk.
Technology risk: Information technology risk occurs when there are security breaches and operational failures. Some examples are artificial intelligence risks, budget risk, loss of data and infrastructure risk.
Credit risk: Also known as default risk, is the loss incurred by a party when the borrower doesn’t fulfill its financial obligations to repay its debt. Types of credit risk are concentration risk, country risk, and credit default risk.
Insurance risk: Insurance risk covers the probability that an incident will occur, for which the insurer has to pay the insured. In life insurance, for example, the risk is that the insured person will die (due to reasons like lifestyle and activities) before their premium is due.
As a risk manager, your responsibility is to ensure that the project you’re overseeing is under a management system that identifies and protects the company from potential threats/risks and allows it to operate while minimizing the impact of such risks.
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Popular Specialization in Risk Management Profession
This is the analysis of risks before making investments such as stocks, bonds, cash, or market funds. Some examples of portfolio risks are inflation risks, component risks, and structural risks.
What does a Risk Manager do?
A risk manager works directly for a company or provides risk consulting to various companies. Here are some of his responsibilities depending on your specialized area of work:
- Reading various reports such as economic reports, financial statements, reports on loan repayment records of a bank’s clients, reports on security breaches in your company’s information systems, etc.
- Analyzing a lot of information on economics, business, political scenarios, currency exchange rates, financial situations, investment situations, trade policies of various countries, types of malware and cyber-attacks, etc. to find out different types of risk involved for your company or for your clients.
- Managing policies of the company such as global and national insurance policies to enable full transparency while operating.
- Structuring risk-related and legal contracts when engaging with various parties such as vendors, agents and service providers. You must also see to it that these records are filed and stored properly.
- Outlining a plan that will help minimize the risks you have detected. A risk management plan consists of various factors such as methods and approaches used to mitigate risks, the roles, and responsibilities of each team of the company, setting a budget to execute the plan, calculating the impact of each approach and tracking its progress.
- Coordinating with various departments involved in the planning, reviewing the management plans, producing reports and presenting them to the company stakeholders.
How to Become a Risk Manager – Eligibility Criteria
Undergraduate studies after school:
You can get a bachelor’s degree in B.E./B.Tech. in any Engineering or Computer Engineering/ Electrical Engineering / Electronics Engineering / Information Science & Engineering/Similar course, B.Sc. Computer Science/Information Technology / BCA / similar courses / any Bachelor degree with Mathematics, B.Com.
Post Graduate studies:
Following your bachelor’s degree, you can study for a Master’s degree in Commerce / M.Sc. Computer Science/ M.Sc. IT / MCA/ Similar courses, M.E./M.Tech. in Computer Engineering, MBA in Business Administration / Finance / Banking & Financial Services/ Investment Management / International Business / Marketing/ Similar courses.
UGC has recently recognized the CA/CS/ICWA Qualifications as equivalent to Postgraduate Degree.
At the beginning of your career, you may get an offer in a role such as:
- Business Analyst
- Credit Research analyst
- Market Risk analyst
- Capital Risk analyst
Risk managers usually work a nine-to-five job, but the hours per week may increase once you take on a senior role. You’ll mostly be working out of an office and may have to travel from time to time for client meetings. If not working from the office, you’ll be expected to be available on call, at least in times of market turbulence or a financial crisis. Most of your work will be done using a computer since research and collection of data is an essential part of your job.
Salary of a Risk Manager
At a fresher’s level, you can start with a salary of Rs. 50,000 – Rs. 2,00,000 per month. At a junior-level job in the field, you can earn a salary of Rs. 70,000 – Rs. 3,00,000 per month. At the mid-level, you pull a salary of Rs. 1,00,000 – Rs. 5,00,000 or more per month. At a senior position as a risk manager, you can earn a monthly salary of Rs. 2,50,000 – Rs. 12,00,000 or even more per month. The higher salary figures are generally paid to postgraduates of premier institutes in the country such as IIMs, ISB, XLRI, FMS Delhi, etc.
Career Progression in Risk Management Profession
At ground level, you may start at the position of a Risk Analyst / Risk Management Associate who supports the implementation of procedures. After 2-3 years of work experience and one you understand its knowledge and application, you can get promoted to a senior manager level if you are from a premier institute. On a senior level, you can get promoted to a Vice President or President position. In consulting companies, you will begin as an Associate Analyst and then move to Senior Associate Analyst, Associate Consultant, Consultant, Senior Consultant, Vice President, President and Partner.
What does industry trends say – future prospects
According to the Risk Survey 2018 by Deloitte, 64% of organizations in India prefer having an in-house team to handle all risk management functions, and 61% of the organizations have appointed a full-time Chief Risk Officer (CRO) to take a leadership position. This indicates that there has been an upward trend as more companies find it beneficial in hiring a full-time CRO in their team.
For a company to identify, eliminate and manage risks, it is important for them to invest in tools, technologies, and skills. Based on a survey conducted with corporate companies, the last 3 years suggest that there is yet a lot of scope and skill sets to be tapped into. Considering how dynamic this industry is, companies are looking for more resources and manpower to invest in.
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