Financial Risk Analyst Job Description, Key Duties and Responsibilities
What Does a Financial Risk Analyst Do?
Financial risk analysts identify and analyze the areas of potential risk threatening the assets, earning capacity, or success of an organization with the goal of maximizing profits and minimizing operating losses.
They work in investment companies, insurance companies, banks, credit unions, consulting firms, financial institutions, and other medium to large-sized commercial and industrial organizations.
The job description of a financial risk analyst entails performing financial analysis and modeling that maximizes profits and asset growth and minimizes operating losses and other risk exposures.
It also involves providing analytical support for various business strategies to ensure the organization’s goals are met; utilizing and adapting financial models and simulating scenarios to optimize business performance and manage strategic risk exposure.
Financial risk analysts are required to provide support for all lending businesses, including credit cards, consumer loans, real estate, business services, and education lending.
They also assist with the production of performance reports to management.
They are responsible for developing and optimizing risk strategies and credit guidelines that drive portfolio growth while ensuring that portfolios operate within boundaries of acceptable risk.
Their duties also entail conducting statistical/financial analysis on internal and external market data to discover the tradeoffs of competing business objectives such as growth, profitability, market share and competitive position.
Financial risk analysts develop business intelligence dashboards to inform decision-making and facilitate risk monitoring, and also provide financial modeling to assess and predict profitability and performance of products and/or services.
They are also responsible for creating financial reports based on the impact of predictive modeling assumptions as well as developing various financial models and providing cost-benefit analyses for business and strategic opportunities, market share, and profitability.
Their work description also involves developing and testing multiple hypotheses and utilizing results from analyses to generate and answer new questions leading to more in-depth understanding of business issue(s) being studied.
Financial Risk Analyst Job Description Example/Sample/Template
Financial risk analysts perform various functions, which covers providing management with evaluations of a bank’s risk profile.
The analysts are also responsible for generating and reviewing risk measures and VAR; generating and reviewing income simulation to ensure the bank’s risk/return/dividend targets and goals; and providing support for model and report enhancement.
The major tasks, duties, and responsibilities a financial risk analyst would normally perform are listed in the job description example below:
- Analyzes the firm’s market position applying complex modeling techniques to find value at risk (VAR) measurements
- Protects the firm’s assets and public image
- Undertakes quantitative analysis using financial packages and software, including portfolio management software
- Assists in developing financial strategies that achieve the firm’s targeted financial returns and risk
- Provides evaluations of the firm’s risk, including generation of value at risk (VAR), interest and spread duration, and equity duration
- Responsible for maintaining data used for identifying, collecting, capturing, analyzing, and measuring risks and income simulation measures
- Leads the process and work closely with other Bank staff to ensure timely and correct production of reporting requirements
- Assists in maintaining a professional risk control environment that is conducted within risk limits, processes, and standards set for regulatory and operational risks of the Bank and as reviewed by the Auditors/Examiners
- Provides support for research projects, error checking, model validation, and income simulation
- Responsible for creating monthly Income simulation and review, including stress, back-tests, and reconciliation; as well as participates in quarterly simulation assumption updates
- Generates annual simulation using the firm’s business plans
- Responsible for Gap report creation and analysis
- Tests proposed software upgrade and work with analytics vendor
- Responsible for error checking and the creation of automatic and/or programmed testing processes
- Participates in the portfolio profitability measurement process
- Actively participates in the model validation processes
- Participates in maintaining a professional risk control environment that is conducted within risk limits, processes, and standards that are set for regulatory and operational risks of the Bank and as reviewed by the Auditors/Examiners
- Responsible for the documentation of processes and procedures
- Tracks various issues under investigation and resolution process and provides management with regular reports on the status
- Coordinates the production of performance reports for management and presents results to management and business partners
- Responsible for identifying issues pertaining to compliance with state and federal regulations, and ensures that necessary policies, strategies, and procedures are implemented.
Financial Risk Analyst Requirements – Skills, Knowledge, and Abilities for a Successful Career
To be hired for the role of the financial risk analyst in a company, the recruiter will expect you to meet a set of requirements to be certain that you can effectively perform the objectives, obligations, and purpose of the position.
Here are common requirements most employers may expect you to fulfill if you are seeking the job of a financial risk analyst:
- Education: Bachelor’s Degree in Accounting, Finance, Economics, Statistics or Engineering. However, MBA or MS degree in Finance or Economics is a plus
- Certification: CFA (Chartered Financial Analyst) or FRM (Financial Risk Manager) certification is desired but not necessarily a requirement
- Knowledge: Financial risk analysts require strong financial knowledge, including knowledge of market risk, ALM, and valuation concepts with focus on fixed income and derivatives valuation, including MBS, CMBS, swaps, and options. Experience Knowledge and/or training in ALM modeling, fixed income analytics, planning, and income forecasting, or market risk (ALM or fixed income portfolio) at a financial institution
- Also, experience in financial modeling, forecasting, cost benefit analysis and cash-flow analysis; and experience in statistical/risk modeling and forecasting preferably related to financial services may also be required
- It is also essential that analysts have the ability to build and maintain financial models and perform comparative financial modeling using pertinent industry analysis and current assumptions. It is also vital they have skills in building business intelligence dashboards
- Analytical and statistical skills: Financial risk analysts should be highly numerate with strong Mathematical skills – working knowledge of mathematical optimization techniques such as linear and mixed-integer programming, including experience in stochastic optimization. It is also required that they possess a working knowledge of statistical methods such as linear and logistic regression, neural networks, decision trees, time-series and forecasting, K-means clustering, survival analysis, etc.
- Presentation skills: They require this skill to present findings, conclusions and alternatives, as well as provide clear explanations for complex and technical data in a clear and concise manner to users, management, and other staff
- Research skills: They require the ability to undertake research, analyze data, processes and trends
- Interpersonal skills: They require this skill to build effective relationships through rapport, trust, diplomacy and tact
- Decision Making: Risk analysts should be able to exercise initiative and using good judgment to make sound decisions.
- Computer skills: They require an Intermediate to advanced Excel knowledge, especially for financial modeling, and experience with analytical/data collection tools such as SAS, R, VBA, Python, SQL, MATLAB, and Database construction and management is a plus
- Financial Modeling: It is essential that they possess the skill to input and generate a series of complex reports; having knowledge of the assumptions (will not necessarily develop own assumptions) built into modern pricing theory for instruments. It is also vital that they understand and review inputs and reports for coherence and reasonableness.
- Strong verbal and written communication skills: Financial risk analysts require strong communication abilities to work effectively with people
- Stress management: It is essential that they have the capacity to cope with pressure and make rational and sound decisions even under pressure.
- They also require strong planning and organizational skills, as well as problem-solving ability.
To hire a financial risk analyst, recruiters’ need to publish the job description for interested individuals to know what the role entails and the requirements to meet.
To make a good description of the role for their organizations, recruiters, HR managers, or employers can apply the sample job description provided in this post.
They are sure to be able to attract the best candidates for the financial risk analyst position by writing and publishing a comprehensive description for the position.
Also, individuals interested in the financial risk analysis career and want to learn about what the role entails will find this article helpful.
Did this post help to increase your knowledge of what financial risk analysts do? Please, make a comment in the box below. You can also discuss your job description and experience if you work as a financial risk analyst in an organization.