Financial risk analyst

A Financial Risk Analyst is a specialized professional responsible for assessing and mitigating various financial risks that an organization may face. These risks include market risk, credit risk, operational risk, and liquidity risk. Financial Risk Analysts use quantitative analysis, financial modeling, and risk management strategies to help organizations make informed decisions that align with their risk tolerance and financial goals.

Here are some of the typical duties of financial

• Evaluate potential financial risks impacting the organization’s financial performance.
• Use statistical models and financial analytics to assess the probability and impact of different risks.
• Analyze market trends, economic indicators, and external factors affecting financial markets.
• Assess the creditworthiness of counterparties and borrowers to minimize credit risk.
• Identify and analyze risks related to internal processes, systems, and human factors.
• Monitor and manage the organization’s ability to meet short-term financial obligations.
• Develop and maintain financial models to simulate various risk scenarios.
• Prepare and present risk reports to senior management and stakeholders.
• Ensure compliance with relevant financial regulations and risk management standards.
• Recommend and implement strategies to mitigate identified risks.

The following job titles also refer to financial risk analyst:

operational risk analysts
credit risk analysts
consortia advisor
chief risk officers
corporate risk department manager
chief risk officer
corporate risk department managers
consortia representative
risk managers
operational risk analyst

Financial Risk Analysts typically work in financial institutions, investment firms, or corporations with significant exposure to financial markets. The role involves a combination of office work, data analysis, and collaboration with risk management teams. Analysts may need to adapt to fast-paced environments, especially during periods of increased market volatility.

A bachelor’s degree in finance, economics, mathematics, or a related field is typically required for Financial Risk Analyst positions. Many analysts also hold advanced degrees such as a Master’s in Business Administration (MBA) or specialized certifications like Financial Risk Manager (FRM) or Chartered Financial Analyst (CFA). Strong quantitative and analytical skills are essential, and proficiency in financial modeling tools is advantageous. Practical experience gained through internships or entry-level positions in risk management contributes to the development of financial risk analysts. Continuous learning, staying updated on financial regulations, and obtaining relevant certifications contribute to the ongoing success of Financial Risk Analysts in navigating complex financial landscapes.

ISCO skill level is defined as a function of the complexity and range of tasks and duties to be performed in an occupation. It is measured on a scale from 1 to 4, with 1 the lowest level and 4 the highest, by considering:

• the nature of the work performed in an occupation in relation to the characteristic tasks and duties
• the level of formal education required for competent performance of the tasks and duties involved and
• the amount of informal on-the-job training and/or previous experience in a related occupation required for competent performance of these tasks and duties.

Financial risk analyst is a Skill level 4 occupation.

These occupations, although different, require a lot of knowledge and skills similar to financial risk analyst.

mergers and acquisitions analyst
business economics researcher
corporate treasurer
investment analyst
actuarial consultant

This knowledge should be acquired through learning to fulfill the role of financial risk analyst.

• Risk transfer: The financial techniques aimed at avoiding damaging a business financially and, instead, protecting it in its operations. It is the operation of transferring liabilities and claims to third parties that have the financial muscle and specialise in bundling and managing risks in scale.
• Financial forecasting: The tool used in performing fiscal financial management to identify revenue trends and estimated financial conditions.
• Financial management: The field of finance that concerns the practical process analysis and tools for designating financial resources. It encompasses the structure of businesses, the investment sources, and the value increase of corporations due to managerial decision-making.
• Risk management: The process of identifying, assessing, and prioritising of all types of risks and where they could come from, such as natural causes, legal changes, or uncertainty in any given context, and the methods on dealing with risks effectively.
• Assessment of risks and threats: The security documentation and any security-related communications and information.
• Economics: Economic principles and practices, financial and commodity markets, banking and the analysis of financial data.
• Financial analysis: The process of assessing the financial possibilities, means, and status of an organisation or individual by analysing financial statements and reports to make well-informed business or financial decisions.
• Financial jurisdiction: Financial rules and procedures applicable to a certain location, whose regulatory bodies decide on its jurisdiction

These skills are necessary for the role of financial risk analyst.

• Advise on risk management: Provide advice on risk management policies and prevention strategies and their implementation, being aware of different kinds of risks to a specific organisation.
• Analyse market financial trends: Monitor and forecast the tendencies of a financial market to move in a particular direction over time.
• Manage financial risk: Predict and manage financial risks, and identify procedures to avoid or minimise their impact.
• Create risk reports: Gather all the information, analyse the variables, and create reports where the detected risks of the company or projects are analysed and possible solutions are suggested as counteractions to the risks.
• Analyse financial risk: Identify and analyse risks that could impact an organisation or individual financially, such as credit and market risks, and propose solutions to cover those risks.
• Create risk maps: Use data visualisation tools in order to communicate the specific financial risks, their nature and impact for an organisation.

This knowledge is sometimes, but not always, required for the role of financial risk analyst. However, mastering this knowledge allows you to have more opportunities for career development.

• Business management principles: Principles governing business management methods such as strategy planning, methods of efficient production, and people and resources coordination.
• Debt collection techniques: The techniques and principles used to collect overdue debt from customers.
• International commercial transactions rules: Pre-defined commercial terms used in international commercial transactions that stipulate clear tasks, costs and risks associated with delivering goods and services.
• Securities: The financial instruments traded in financial markets representing both the right of property over the owner and at the same time, the obligation of payment over the issuer. The aim of securities which is raising capital and hedging risk in financial markets.
• Accounting techniques: The techniques of recording and summarising business and financial transactions and analysing, verifying, and reporting the results.
• Information confidentiality: The mechanisms and regulations which allow for selective access control and guarantee that only authorised parties (people, processes, systems and devices) have access to data, the way to comply with confidential information and the risks of non-compliance.
• Teamwork principles: The cooperation between people characterised by a unified commitment to achieving a given goal, participating equally, maintaining open communication, facilitating effective usage of ideas etc.
• Legal research: The methods and procedures of research in legal matters, such as the regulations, and different approaches to analyses and source gathering, and the knowledge on how to adapt the research methodology to a specific case to obtain the required information.
• Principles of insurance: Understand the principles of insurance, including third-party liability, stock and facilities.

These skills and competences are sometimes, but not always, required for the role of financial risk analyst. However, mastering these skills and competences allows you to have more opportunities for career development.

• Apply credit risk policy: Implement company policies and procedures in the credit risk management process. Permanently keep the company’s credit risk manageable and take measures to avoid credit failure.
• Create solutions to problems: Solve problems that arise in planning, prioritising, organising, directing/facilitating action and evaluating performance. Use systematic processes of collecting, analysing, and synthesising information to evaluate current practice and generate new understandings about practice.
• Produce statistical financial records: Review and analyse individual and company financial data in order to produce statistical reports or records.
• Advise on tax planning: Advise on appropriate strategies to include taxes in the overall financial plan in order to reduce the tax load. Advise on questions related to tax legislation and provide advice on the possible implications that decisions in financial matters can cause in a tax declaration.. Advise on questions concerning things such as company creation, investments, recruitments, or company successions.
• Prevent fraudulent activities: Identify and prevent suspicious merchant activity or fraudulent behaviour.
• Perform data analysis: Collect data and statistics to test and evaluate in order to generate assertions and pattern predictions, to discover useful information in a decision-making process.
• Control financial resources: Monitor and control budgets and financial resources, providing capable stewardship in company management.
• Speak different languages: Master foreign languages to be able to communicate in one or more foreign languages.
• Optimise financial performance: Direct and coordinate the organisation’s financial operations and budget activities, in order to optimise financial performance.
• Apply statistical analysis techniques: Use models (descriptive or inferential statistics) and techniques (data mining or machine learning) for statistical analysis and ICT tools to analyse data, uncover correlations and forecast trends.
• Assess risks of clients’ assets: Identify, evaluate and determine the actual and potential risks of your clients’ assets, considering confidentiality standards.
• Prepare credit reports: Prepare reports that outline an organisation’s likelihood of repaying debts on time, meeting all the legal requirements linked to the agreement.
• Create a financial plan: Develop a financial plan according to financial and client regulations, including an investor profile, financial advice, and negotiation and transaction plans.
• Interpret financial statements: Read, understand, and interpret the key lines and indicators in financial statements. Extract the most important information from financial statements depending on the needs and integrate this information in the development of the department’s plans.
• Analyse economic trends: Analyse developments in national or international trade, business relations, banking, and developments in public finance and how these factors interact with one another in a given economic context.
• Prepare financial statements: Collect, enter, and prepare the set of financial records disclosing the financial position of a company at the end of a certain period or accounting year. The financial statements consist of five parts, which are the statement of financial position, the statement of comprehensive income, the statement of changes in equity (SOCE), the statement of cash flows and notes.
• Examine credit ratings: Investigate and look for information on the creditworthiness of companies and corporations, provided by credit rating agencies in order to determine the likelihood of default by the debtor.
• Provide support in financial calculation: Provide colleagues, clients or other parties with financial support for complex files or calculations.
• Assess mortgage risk: Assess whether the borrowers of a mortgage loan are likely to pay back the loans in a timely manner, and whether the property fixed in the mortgage is able to redeem the value of the loan. Assess all the risks involved for the lending party, and whether it would be beneficial to grant the loan or not.
• Manage currency exchange risk mitigation techniques: Evaluate foreign currency and assess conversion risks; implement risk mitigation strategies and techniques to protect against fluctuation.
• Negotiate sales contracts: Come to an agreement between commercial partners with a focus on terms and conditions, specifications, delivery time, price etc.
• Apply information security policies: Implement policies, methods and regulations for data and information security in order to respect confidentiality, integrity and availability principles.
• Analyse financial performance of a company: Based on accounts, records, financial statements and external information of the market, analyse the performance of the company in financial matters in order to identify improvement actions that could increase profit.
• Write work-related reports: Compose work-related reports that support effective relationship management and a high standard of documentation and record keeping. Write and present results and conclusions in a clear and intelligible way so they are comprehensible to a non-expert audience.
• Inspect data: Analyse, transform and model data in order to discover useful information and to support decision-making.
• Analyse the credit history of potential customers: Analyse the payment capacity and credit history of potential customers or business partners.
• Disseminate information on tax legislation: Provide advice on the possible implications for companies or individuals on decisions regarding tax declaration based on tax legislation. Advise on the favourable tax strategies that could be followed depending on the client’s needs.
• Carry out statistical forecasts: Undertake a systematic statistical examination of data representing past observed behaviour of the system to be forecast, including observations of useful predictors outside the system.
• Enforce customer’s debt repayment: Monitor customers to pay all debts and amounts due; negotiate return of merchandise.
• Deliver visual presentation of data: Create visual representations of data such as charts or diagrams for easier understanding.
• Have computer literacy: Utilise computers, IT equipment and modern-day technology efficiently.
• Assess risk factors: Determine the influence of economic, political, and cultural risk factors and additional issues.
• Compile statistical data for insurance purposes: Produce statistics on potential risks such as natural and technical disasters and production downtimes.
• Develop models: Develop simplified descriptions, mainly mathematical descriptions of processes or systems, in order to assist calculations and predictions.
• Analyse insurance risk: Analyse the probability and size of the risk that is to be insured, and estimate the value of movable or immovable property of the client.
• Show diplomacy: Deal with people in a sensitive and tactful way.
• Apply credit stress testing methodologies: Use several approaches and credit stress test methodologies. Determine and analyse which reactions to different financial situations or sudden changes can have an impact on the whole economy.
• Maintain financial records: Keep track of and finalise all formal documents representing the financial transactions of a business or project.

2413 – Financial analysts

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References

1. Financial risk analyst – ESCO
2. Financial risk analyst job description – gradireland
3. Financial risk analyst job profile – Prospects.ac.uk
4. Featured image: Photo by Tima Miroshnichenko