Moving Into Risk From Another Career Path
Is it feasible to switch career path into risk management? The answer is, as usual, “it depends”. Moves into risk management from Finance, Internal Audit, Compliance, Business Operations and even IT are not uncommon – but generally they are made more feasible if the skills of the particular risk management destination match those of the candidate.
Risk management is a broad church so having a view on the area of risk management that you want to move into will help you ascertain whether your skills and experience are relevant. Let’s take a look at some of the different areas of risk management and the sorts of skills that are needed in each:
- Market risk. Managing the financial risks associated with interest rate, exchange rate, equity price, etc. movements. This is an extremely quantitative discipline so a background in statistics – including coding statistical models – will be relevant. An understanding of the market risk dynamics of the products of the financial institution (e.g., derivatives, etc.) will be beneficial. Those without a quant background may wish to consider taking the Financial Risk Manager (FRM) qualification.
- Credit risk. Managing the risk of loss due to counterparty default on a financial obligation. Credit risk management entails establishing a view on the financial soundness of a counterparty, which means getting to grips with the finances of the counterparty itself as well as with the dynamics and pressures of the industry that it operates in. Individuals with strong accounting and financial analysis skills may wish to consider this a suitable destination, irrespective of their current role.
- Operational risk. Managing the risk of loss from ineffective internal processes, people, systems, or external events that disrupt business operations. Here, individuals who understand the corresponding business function(s) inside out – as well as their associated operational risks – will be highly prized.
There are many other risk management domains (e.g., liquidity risk, conduct risk, cybersecurity, etc.). Figuring out which is or are your preferred destinations and then which of these best matches your skills and experience is a sensible first step.
Notwithstanding the points made above, sometimes serendipity is everything. It’s not impossible to make a move which breaks the mould if you’re in the right place at the right time with the right skills. Transferable skills which apply to most risk domains include skills in conducting audits or assurance reviews of data, policies and processes; regulatory knowledge; interpersonal and communication skills.
Smaller organisations in particular – who often find it difficult to source experienced risk talent – can be more willing to accommodate career moves which might seem unorthodox in larger organisations.
Also, regulatory developments can sometimes create opportunities for career moves into risk management. For example, the FCA’s recent focus on outsourcing and operational resilience creates opportunities for individuals with strong supplier management experience to move into risk management. Similarly, the FCA’s new Consumer Duty Rules is creating opportunities for those with a strong understanding of the end-to-end product development and customer experience lifecycle to make a similar move. So keeping an eye on upcoming regulatory change is another useful activity for those wishing to make the move into risk.