What Does a Risk Management Employee Do?
Learn About the Salary, Required Skills, & More
Benjamin Franklin once famously said that an ounce of prevention is worth a pound of cure, and this sentiment is what risk management is all about. It's a field within financial services and other industries that involves identifying, assessing, and quantifying business risks. Measures are then taken to avert, control, or reduce these risks.
Risk management is often part of the compliance function of a business, but it might also be part of specific business units such as securities trading desks or loan origination departments.
Risk Management Employee Duties & Responsibilities
Risk managers might be generalists who cover several different areas, or they might be specialists who concentrate on a single area. In either case, many of their duties and responsibilities are the same.
- Develop, implement, and enforce rules and procedures designed to mitigate risks.
- Set policies regarding data security in close partnership with their respective firms' information technology groups.
- Employ various financial instruments and contracts to control risks, such as insurance, swaps, derivatives, futures contracts, and options contracts.
- Address default on loans extended by the firm.
- Monitor securities inventories held by traders.
- Monitor losses on investment securities held for the firm’s own account
- Assess counter-party risk when another financial firm fails in its obligations to the firm.
Risk Management Employee Salary
The Bureau of Labor Statistics combines risk managers with other categories of financial managers, and risk management employees' salaries can depend on the field or business in which they're employed. The median incomes for all financial managers in 2018 were:
- Median Annual Salary: $127,990 ($61.53/hour)
- Top 10% Annual Salary: More than $208,000 ($100.00/hour)
- Bottom 10% Annual Salary: Less than $67,620 ($32.50/hour)
Source: U.S. Bureau of Labor Statistics, 2018
Pay packages for risk managers often far exceed the averages for financial managers in general. Those employed in this position might earn bonuses and commissions in addition to salaries, and they often receive the added perk of profit sharing.
Education, Training & Certification
Those looking for careers in risk management must have college degrees and related experience.
- Education: A bachelor's degree is the bare minimum if you want to work in risk management, and an MBA is more typically required. Courses in risk management are increasingly common at both the undergraduate and graduate levels, and some institutions even offer degrees in risk management. A four-year degree in a business, economy or finance major can often suffice, however, because this is a field where it's possible to get your foot in the door and work your way up, gaining on-the-job experience on the inside.
- Experience: A background in management science and in the development or use of predictive models can be very helpful. A primary concern for risk managers in securities firms tends to be potential mark to market losses on inventories of securities held by trading desks. As a result, prior experience as a trader or as a trading desk assistant can be invaluable for a risk manager in this type of firm. Experience in law, accounting, compliance, insurance, or operational areas of the financial services industry are important credentials.
- Certification: Several formal risk management certifications are available, and they're being required by a growing number of employers. They can help start or advance a career in the field, but some companies don't yet demand them.
Risk Management Employee Skills & Competencies
You should have several essential qualities to succeed in risk management.
- Math skills: These skills can be of paramount importance in the finance sector, along with a thorough knowledge of finance and financial documents.
- Organizational skills: You'll be dealing with a wide range of information, data, and documents which you might have to lay your hands on at a moment's notice.
- Communication skills: People skills are important as you deal with individuals from varying backgrounds, explaining concepts and transactions that not all will be intimately familiar with.
- Writing skills: These skills will come in handy when you're preparing reports and other documents.
The U.S. Bureau of Labor statistics anticipates job growth in the field of risk management at about 19% through 2026. This is significantly faster than average for all occupations, but it can vary by industry.
Data breaches and identity theft are growing problems in all industries, not just financial services, increasing the need for good risk management teams.
Risk management is a crucial function and it offers a great deal of intrinsic job satisfaction. Positions in this field are typically well-respected. The work can be fast-paced and stimulating, but the flip side is that the demands of the job can become overwhelming in turbulent periods.
The "policeman" aspect of risk management can also create an adversarial relationship with employees and staff and some categories of producers, particularly securities traders.
The time commitment required by a career in risk management can be highly variable depending on the firm and the position. Technically, it's a nine-to-five job, but risk management is a vital function so managers can generally expect to put in work weeks that exceed 40 hours, at least in times of emergency. Risk management personnel might be constantly on call during periods of high market turbulence and financial uncertainty.
How to Get the Job
Associations and organizations like the International Risk Management Institute and the National Alliance for Insurance Education and Research offer education, certification, and can provide valuable contacts.
REVIEW COMMONLY ASKED INTERVIEW QUESTIONS
Accounting Path provides some interview tips specifically for risk managers.
Comparing Similar Jobs
Some similar jobs and their median annual pay include:
- Auditor: $70,500
- Budget Analyst: $76,220
- Personal Financial Advisor: $88,890
Source: U.S. Bureau of Labor Statistics, 2018