Becoming a successful risk analyst requires you to hold a good educational background undoubtedly but besides, in this job profile, you need a lot of personality traits, skills and interests.
So, in this article, you will learn all that is important to become a risk analyst and to make it into a successful career.
This article covers:
- Who is a risk analyst?
- Responsibilities/Job description of a risk analyst
- Types of risk analysts
- Educational background and essential traits to become a risk analyst
- Salary of a risk analyst
- How to land a job?
Who is a Risk Analyst?
Risk analyst is someone who identifies, assesses and monitors the amount of risk that the organization is exposed to. The role of risk analyst requires them to find out the impact of risk with the help of analysis of historical data.
Risk analysts specialise in accordance with the type of risk. The most common and known types of risk are credit risk, liquidity risk, market risk and operational risk.
Further, we will find out the responsibilities or the description of the job profile of a risk analyst.
Responsibilities/Job Description of a Risk Analyst
A risk analyst is responsible for risk management in the investments so as to help with the financial success of the organisation where they work. The risk analysts mainly identify and analyse the potential risks associated with the areas mentioned above and then develop risk mitigation strategies for the same.
Also, these strategies help with maximising gains while reducing risks.
Okay, let us take a look at the responsibilities of a risk analyst enlisted below:
- To review financial and accounting-related papers or documents
- To review industry-related developments and other resources
- Research and study the events in the current scenario and anticipate any effect on the economy as well as the financial industry
- Constantly keeping a check on the compliance requirements
- Create contingency plans for emergency cases such as a market crash because of a pandemic situation, or government policy change, etc.
- Hedging the risk
Next, we will find out the types of risk analysts.
Types of Risk Analysts
Risk analyst is mainly the job profile which is required in the areas such as trading, financial services and private banking. There are four major types of risk analysts:
- Credit risk analyst
- Market risk analyst
- Operational risk analyst
- Regulatory risk analyst
Credit risk analyst
A credit risk analyst analyses the risk which the organization faces because of its clients or customers defaulting on loans, credit and also the ones which do not pay for goods or services.
A career in the credit risk analyst role fetches you a salary which ranges between $29,624.75 to $37,919.68. Also, seniority of the role is extremely crucial while deciding the salary of the credit risk analyst.
This role is extremely important for the investment banks and investment companies. A credit risk analyst in the investment banking sector helps to find out which institution to trust while purchasing a product such as an exotic option. Hence, a credit risk analyst helps against such counterparty risks.
Market risk analyst
The market risk specialists do the analysis of the negative effect of the factors that pose risk to the organization’s share prices, such as an economic recession.
The salary for a market risk analyst ranges from $109,234 to $115,800. Market risk analysts are hired mainly by the hedge funds where they help the risk managers with market risk measures, models and best practices. Apart from hedge funds, they also get the opportunity to be hired in all financial institutions including but not limited to the energy industry involved in producing and selling energy. Hence, market risk analysts play a crucial role in making sure that the market risks are looked into properly so that preventive actions can be taken.
Operational risk analyst
An operational risk analyst helps to analyse the effect of risky operational situations or occurrences such as employee fraud, material waste, product malfunction and failure of the system etc. The salary of an operational risk analyst ranges from $5,001.86 to $23,184.31.
Considering that some operational risk is always borne by every company, it is essential that this risk is managed in the best possible way. For instance, a lack of contingency plans for situations like a pandemic, recession etc. will lead to loss while trading. An operational risk analyst helps you create a plan for such emergencies.
Regulatory risk analyst
This analyst finds out the effect of legislation that has already come as well as any forthcoming one which may have an effect on the organisation. The average salary of a regulatory risk analyst ranges from $44,000 to $89,000. A regulatory risk analyst is also hired by almost all the industries but specifically, those companies which are into technology, finance, accounting, government services and operations. Such companies’ operations are mostly affected by the change in legislation. For instance, tax changes as well as new regulations by government effects the way trading happens in the stock market.
Alright! This was all about types of risk analysts. Here it is also important to note that a risk analyst wears multiple hats and does perform different roles single-handedly as well. Hence, a firm can hire you as a risk analyst for performing each of these roles.
*All the salaries mentioned above are the average ranges in USD (U.S Dollar) from Glassdoor.com*
Going forward, now we will discuss the educational background and the essential traits or the characteristics needed to become a risk analyst.
Educational Background and Essential Traits to Become a Risk Analyst
To become a risk analyst, there are some degrees and courses which should help you with the right set of knowledge.
Entry-level positions typically require:
- College diploma or
- Undergraduate university degree
Senior positions may require:
- Graduate degree
- PhD/doctoral candidates
- Actuarial Science
- Risk Management
- Mathematical Finance
- Information Systems
- Business Administration
- Mathematical Finance
- Basic sciences
Employers may prefer candidates to possess one or more of the following certifications:
- Associate in Risk Management (ARM)
- Chartered Financial Analyst (CFA®)
- Financial Risk Manager (FRM®)
- Professional Risk Manager (PRM™)
After understanding what educational background is required to become a risk analyst, next we will put the focus on what are the essential characteristics that help you become a risk analyst.
The following characteristics/traits are highly appreciated for becoming a risk analyst:
- Analytical mind and a good hold in mathematics
- Knowledge of data analysis
- Strategic mindset for mitigating risk
- A go-getter attitude
- Coordination skills to understand the requirements of different departments with regard to risk
- Highly ethical
Apart from the characteristics of the risk analyst mentioned above, one must make sure that the work is enjoyed thoroughly and with dedication as well as perseverance. Such a determined attitude makes the individual enjoy a long-lasting and successful career.
Risk analysts are usually hired on a full-time basis but can also be hired on a contract basis by some firms. Their role is quite crucial in making sure that the firm maximises its gain by controlling the common risks.
Let us see which are such firms who require risk analyst to work actively and they are:
- Commercial banks
- Trading firms
- Investment banks
- Financial services institutions
- Risk management consulting firms
- Insurance companies
Also, the risk analysts are not restricted to one sector, which implies that they are hired in different companies belonging to both the public and private sector.
Now, let us find out the salary of a risk analyst.
Salary of a Risk Analyst
Although the salary level of a risk analyst varies on the basis of various factors such as experience, abilities, size of the employer etc., there is an average base salary for a risk analyst in each country which we have mentioned here:
Average Base Salary/year
Let us now find out how to land a job as a risk analyst.
How to Land a Job?
Until now, we have seen that a risk analyst works in different industries for specific risk controls. To land a job as a risk analyst, it is essential to take care of these aspects:
- Becoming skilled
- Finding the right career opportunities
- Preparing for the interview
- Constant professional development
To land a job as a risk analyst, it is extremely important to fill out the gap in the skills, even if you have the preferred educational degree. On a personal level as well as the academic level you can build upon the requirements before applying for a job.
Finding the right career opportunities
As an aspiring risk analyst, you must shortlist the top companies you will be interested to work for and then apply in the job profiles which suit you the best.
Some of the top companies that look for a risk analyst are:
Preparing for the interview
By using platforms such as LinkedIn, you can help yourself get an interview by showing your skills and talents. Getting an experience with the interviews a couple of times can also help prepare you for better opportunities.
Constant professional development
Keeping up with the new opportunities and finding ways to better yourself professionally will help you enhance your capabilities. Also, you will be able to contribute exceptionally well to the company you are working for. Mainly, you must look to constantly improve yourself even after landing a job.
The role of a risk analyst requires some dedication and perseverance which carries on with your interest in particular responsibilities mentioned in the article. Having a good skill set is extremely crucial for cracking the interview and maintaining the reputation ahead. Also, as a risk analyst, you get hired in some progressive firms and get the opportunity to grow both professionally and financially.
Disclaimer: All data and information provided in this article are for informational purposes only. QuantInsti® makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information in this article and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.