Financial vs Non-Financial Risk Jobs
Without risk, there is no reward in the uncertain world of business. This symptom of generating a profit is typically divided into numerous categories to help us understand and manage it – from competitive and compliance to credit and currency. But if we view these risks in their rudimentary form, we can distil them into two distinct types: financial risks and everything else (non-financial risks).
The need to manage these threats to a business’s very existence has given rise to a variety of risk jobs that fall into these two categories – and require different skill sets.
Financial risk refers to a business's ability to manage its debt and fulfil its financial obligations. It typically arises due to instabilities, losses in the financial market or movements in stock prices, currencies, and interest rates.
Jobs that aim to manage financial risk typically require specialised knowledge in areas such as accounting, economics, and financial markets. The goal is to anticipate how changes in the economic environment or specific investments will affect the organisation and its finances.
Two common financial risk roles pervade the business landscape:
- Financial Risk Manager: These risk professionals oversee the process of predicting market trends to help the business make informed decisions, analysing potential financial threats to the business, and devising strategies to mitigate those threats.
- Financial Risk Analyst: Working under the guidance of the Risk Manager, they identify and analyse potential risks to the financial position of the business. It’s their role to formalise the process of risk management, including business decision-making and enabling the process of risk-taking.
These roles are responsible for managing and analysing three sub-categories of financial risk:
- Credit risk: The risk to the business of its customers not paying for goods or services or defaulting on loans.
- Market risk: The external risk factors that may affect the market position of the business.
- Operational risk: Financial implications of failed internal processes, system breakdowns and employee fraud – this overlaps with non-financial risk.
Non-financial risk refers to potential vulnerabilities in a business’s operations (processes and systems) – from cyber and compliance breaches to failing to meet expectations on environmental issues. Jobs that aim to manage this type of risk typically require more qualitative analysis to understand potential impacts and strategies for mitigation.
Non-financial risk encompasses a broad collection of risk sub-categories, each with specific job roles that aim to prevent and mitigate them – including:
- Environmental, Social, and Governance (ESG) risk: This corporate commitment to invest in ESG issues – from CO2 reductions to anti-corruption – has created a fertile jobs market in which opportunities with attractive salaries abound. For example, a record 35,000 British job vacancies centred around ESG were created in 2021.
- Conduct risk: The threat of loss to a business caused by the poor judgment of managers and employees requires professionals that specialise in managing their conduct – from establishing and maintaining a robust conduct framework to providing conduct advice to facilitate the business strategy.
- Cyber risk: The battle against cybercrime – the world's biggest criminal growth industry – requires businesses to keep pace with this dynamic threat. An explosion in demand for cyber professionals saw the global cybersecurity workforce grow to encompass 4.7 million people in 2022 – and there is still a need for more than 3.4 million professionals to fill the cyber skills gap.
- Compliance risk: The constant need to ensure guidelines that are established and regulated internally or by an industry body are adhered to has shoved compliance to the top of the corporate agenda. Central to this is the Compliance Officer, who ensures the business is compliant with rules and regulations by establishing robust systems of control.
Whatever type of risk role aligns with your attributes, you will be entering a dynamic and rewarding field that allows you to positively impact the organisation you work for – and the people that work there.