As regulatory requirements shift and evolve, so must Risk and Compliance professionals keep improving and grow their skills and knowledge. Keeping up with regulation and ongoing wider regulatory programmes, as well as covering the day to day operations at financial firms or banks, requires that Risk Managers are constantly learning, adapting and systematically moving their scope from detail to broad risk and issues management. What in the past was considered a typical back-office function is nowadays regarded as a strategical role in financial services firms, such as wholesale or retail banks, asset management firms, securities brokers, custodians, insurance firms or smaller financial services boutiques.
Risk and Compliance have dedicated managers who advise organisations on any potential risks to the sustainability and profitability of the company – with a special focus on client’s assets (learn more in this Conduct Risk page) . These managers identify and assess threats, put plans in place in advance if things go wrong and decide which controls to have in place to avoid, reduce or transfer risks.
With the constant shifting and evolving regulatory and technological landscape, below is a list of skills which we believe a Risk Manager should have – or work on – should he/she want to become successful in a risk management career. Note that this list is not ordered by importance.
1. Financial acumen
Even if your Risk Management focus is outside of market risk or credit risk, you will have some degree of exposure to numbers. The sharper you are and the more used you are to working with financial tools and looking at numbers the better. However, having financial acumen is more than just understanding numbers. The ideal risk manager must also understand and master the different financial indicators which are tied to the firm’s assets, business lines, platforms, regions, markets, regulations and stakeholders. Additionally, depending on seniority, the risk manager might also need to manage the department’s P&L, time, resources and funding. Moreover, risk managers must sometimes translate not very objective concepts and risks into specific and measurable items, such as key risk indicators (read more in KRI). Mastering numbers enables a risk manager to make sound and quick decisions. Pursuing financial education and skills is an evermore criteria for success both in your career within Risk Management and also valuable for your organisation.
2. Analytical skills and an eye for detail
In our experience, whatever the category of risk you specialise in, as a risk manager you must possess analytical skills and have an eye for detail. But as discussed throughout this article, if you ambition to go up the organisational ladder and reach, for example, the CRO role, you must broaden your scope and be able to constantly shift between the trees and the forest. The more you go up in your career, the more you will have a directing role, managing wider initiatives and above all, managing people. It is therefore crucial that you keep focus of both the broad aspects of your work (e.g. your firm’s business objectives, your department P&L and the firm’s potential top risks) but never losing sight of smaller details that happen on the day to day. You will delegate mostly but your sharp analytical skills and eye for detail, combined with the required abstraction to look at the big picture, will help you flag urgent smaller situations where you will need to step in. Check our Risk Management Books section to browse the existing books, some of them covering this topic.
3. Industry and Market knowledge
Along with the ability to understand broad business issues, the ideal risk manager is comfortable and knowledgeable of the industry he operates in, being it Finance, Insurance, Energy, Retail, just to name a few. By understanding well the industry and market where the firm operates, the risk manager will be much better equipped to identify the posing risks. Above all, the risk manager will have a better notion on how to rank, score and group any potential risk for the firm at a given time. Focusing specifically at financial services industry, nowadays it is normal that a an experienced risk manager or CRO have understanding of topics such as:
- corporate governance;
- enterprise risk management;
- information and security risk;
- market and credit risk;
- regulatory risk;
- operational and technology risk;
- business continuity management.
However, experience in a particular industry can also be helpful if it relates to the sector in which you wish to specialise your risk management role. In summary, an experienced risk manager or potential CRO should be proficient in a specific discipline, such as market risk, credit risk or operational risk, yet with a good knowledge of broader risk issues and regulatory developments.
It is well known that firms seek candidates who understand how global financial markets operate. Former traders or people with trading floor exposure in previous roles are well regarded by hiring managers. With new products and trading strategies being introduced in real time, risk managers must be able to understand the trade straight away, as well as the conviction of the traders or portfolio managers, so that the risks are fully understood. Individuals with trading floor experience are highly valued at investment banks, finance boutiques, brokerage firms, and hedge funds, where the risk exposure is potentially larger and risks are significant.
4. Ability to endure and work under stress
Why do some people thrive under pressure while others simply can’t cope? The key point is how an individual responds to stress. Some people are essentially emotional dealing with stressful situations, while others can keep focus and respond with their rational assessment. It is a fact that two individuals with the same training, exposed to the same stressful situation, can have totally different reactions and hence a different resulting performance.
Pressure is an everyday part of our working lives. Philosopher Thomas Carlyle said, “No pressure, no diamonds,” suggesting that, in manageable doses, it can energize and motivate you to perform and achieve. Too much of it, however, can tip the balance the other way. The trick to making pressure work for you, and not against you, is to find the “sweet spot” between having too little and too much of it.
Successful risk managers must be able to work under pressure as quick decisions will need to be taken in the middle of high stressful times. However, finding the sweet spot is for many very difficult. This is something that risk managers can improve using either self improvement techniques or seeking professional help.
5. Technical skills, negotiation skills and the ability to influence people
This is many times a tricky and wishful mix. How many professionals have you met that have great technical skills but are a complete disaster when dealing with people? Or perhaps the opposite, they are great people and have a permanent positive aura around them, everyone likes them and even feel special when in their presence. But when things get more technical in meetings, they become silent or even make you feel a bit embarrassed by the lack of knowledge on topics that they should be comfortable with. In general, we’ve found that it’s easier to develop the technical skills than the soft skills, which most likely is related to personality and harder to change. Keep these factors in mind, as you develop and progress further in your risk management career, the more skilled you must be dealing with people, negotiating everyday and influencing people towards a given goal.
The ability of influencing people is also a very important trait but not everyone has it. Above all, the ideal risk manager or CRO must know to listen and to inspire people. These are two skills that any good leader must pursue.
6. Good communication and presentation skills
This point is tied to the previous one. In the last decade, firms have determined that ideally risk managers should be educated in quantitative finance. But they also should be experienced in trading or a having had been exposed to a front office function. They must also be able to convey complex financial products and risk management concepts, practices, and processes to senior less technical audiences, including front office directors, senior management and the board of directors. As board of directors make an effort to have Risk Management as a regular topic in the agenda, it is very common for risk managers to be called upon to summarise the various risks that the firm is exposed to, and producing actionable outcomes that can be followed up at the executive committee level by order of the board of directors or the risk committee. Strong interpersonal and communication skills are imperative for risk managers to be successful.
7. Holding academic credentials in Finance and Risk
When scanning a candidate’s CV, firms seek risk managers who have strong academic finance or mathematics/quantitative credentials. Many quantitative risk managers have PhD’s in physics, statistics, or computer science. But top firms seek individuals with strong academic credentials in finance. MBA’s in finance, ideally having rigorous courses loads in quantitative finance, from top universities.. This always gets the attention of recruiters and hiring managers. Specific Risk Management academic credentials are also sought these days.
According to CIO, the top 6 Governance, Risk and Compliance certifications include:
- Certified in Risk and Information Systems Control (CRISC) – read more
- Certified in the Governance of Enterprise IT (CGEIT) – read more
- Project Management Institute-Risk Management Professional (PMI-RMP) – read more
- ITIL Expert – read more
- Certification in Risk Management Assurance (CRMA) – read more
- GRC Professional (GRCP) – read more
The leading certifications for risk managers in the financial services industry are:
- Financial Risk Manager (FRM) by GARP – read more
- Professional Risk Manager (PRM) – read more
Finance Walk performed a thorough study about Risk Management certifications, covering eligibility criteria, pros and cons and the relation of each certification with possible future salaries. Top certifications appearing on this study include CERA, CRM, FRM, PRM and RIMS.
If you’re interested in pursuing education or certification in risk management, please also check the Institute of Risk Management (IRM) website.
8. Strategic thinking capability
Solid risk managers must be forward-looking and strategic minded, having the ability to understand potential risks for the firm, both at departmental level as well as in a wider firm perspective. The head of Risk Management or CRO must be able to keep pace with the quick and volatile nature of financial markets, . Their function, while by nature a control one, should also be of assisting the front office staff and senior management to deliver solutions that align with business objectives as well as obeying risk safeguards. This aspect is especially relevant in credit risk and development of structured products, where credit risk managers are often involved in the structuring process having to ensure that risks are adequately quantified and hedging strategies put in place to mitigate any potential risk materialisation.
9. Endurance to regulation
Risk management in banking has been transformed over the past decade, largely in response to regulatory requirements following the global financial crisis. Recent studies suggest risk management will experience even more changes in the next 10 to 15 years. It is crucial that risk managers dedicate time to work closely with the Compliance department and invest time in learning about the relevant regulations for the firm and industry they work for. Solid risk managers work the best out of regulation rather than having a “tick the box” approach.
Moreover, according to a McKinsey study, regulation will continue to broaden and deepen:
While the magnitude and speed of regulatory change is unlikely to be uniform across countries, the future undoubtedly holds more regulation—both financial and nonfinancial—even for banks operating in emerging economies.
Read more: McKinsey on Risk on Risk Management Guru
10. Networking ability
In the fast paced, quickly shifting financial world we live in, risk managers should constantly make the effort of connecting with other fellow professionals. Using technology and social networks such as Linked In and Twitter, professionals can develop professional connections with other professionals around the world. Moreover, several financial centres, such as London, host several Risk Management Committees that organise periodic conferences and lectures about Risk Management and Regulation, which can be a great place to meet other risk management professionals.
There are numerous advantages of networking:
- Increase awareness and knowledge in risk management
- Broaden the risk manager’s mindset, helping to understand and prioritise what topics are relevant for them
- Help develop the risk management “lingo”, keeping up with current topics and therefore contributing to increase their knowledge
- Be exposed to initiatives taking place and participating in them – being willing to do the extra mile will benefit you as a professional and, again, help increase your knowledge
There are many more advantages but an obvious one is that you might meet your next boss in these networking events.
While these ten skills might be difficult to find in one person, the positive fact is that they can be worked on and improved. As other professions, risk managers must constantly strive to learn more and get more experience, making the right choices along the way.
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