Becoming a risk analyst is a rewarding career opportunity for those who are interested in how companies can manage the risks that come with doing business. Risk analysts work with people from all levels of an organization to assess the potential for problems and develop strategies for avoiding them.
To become a risk analyst, you need to be able to understand and analyze data, identify patterns and trends, and communicate your findings. You should also have strong interpersonal skills, good judgment, and excellent critical thinking skills. You may also need technical skills such as knowledge of accounting or finance as well as computer programming languages like Java or Python.
A bachelor’s degree in risk management or another area related to business is usually required for this job. Some employers will also require experience working in the field before they hire someone as an entry-level risk analyst position.
How To Become Risk Analyst
Financial professionals help companies manage and increase their assets. Risk analysts are financial professionals who calculate risks for a company’s financial portfolios. If you want to pursue a career as a risk analyst, it’s helpful to know the steps most risk analysts follow to secure a job in this industry. In this article, we discuss the responsibilities of risk analysts, their average salary and their education and training requirements.
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What is a risk analyst?
A risk analyst is a financial specialist who examines the risks associated with investments, new clients, economic conditions or regulations to determine whether it is safe to make a financial decision. They forecast potential outcomes and make recommendations to limit risks.
There are four types of risk analysts:
- Credit risk analysts: They analyze risks associated with customers who don’t pay for products or fail to reimburse their loans. Credit risk analysts work for commercial and investment bankers and rate agencies or credit card lenders. They may also find employment with mortgage firms, insurance carriers or other financial service providers.
- Market risk analysts: They study the stock market’s potential impact on their company’s share prices. They often work for various financial institutions or investment companies or in the energy industry.
- Regulatory risk analysts: They assess the effect that new regulations or changes in legislation may have on the stock market and their organization’s business or sector.
- Operational risk analysts: They help an organization prepare for risky operational situations, such as product malfunction or employee fraud, and prepare contingency plans to manage those risks.
Related: Learn About Being a Credit Analyst
What does a risk analyst do?
A risk analyst helps companies minimize the liabilities involved with business decisions by analyzing economic conditions and financial documents and providing advice. They help companies they work for stay financially healthy.
Risk analysts may work for a bank or an insurance company to analyze prospective clients’ applications. They typically work directly with clients to evaluate their credit, method of payment or job history and may communicate through credit officers. If the client is a business instead of an individual, analysts research the market and industry in which it operates to evaluate its competition. They then provide a recommendation on whether their employers should conduct business with the client they have researched. They also connect with other professionals and institutions, including credit bureaus, to collect information and request missing data.
Risk analysts may also work for accounting companies or investment firms, where they identify investment trends and recommend strategies. Some investment methods they research include hedge funds or asset allocation. They may analyze portfolios and calculate potential losses, after which they recommend measures such as currency exchange or diversification to limit risk.
Depending on the type of company they work for, a risk analyst’s tasks might include:
- Collecting and consolidating data from different sources
- Reviewing data to determine risks
- Creating reports and summaries
- Writing procedures for documentation
- Developing quality control measures
- Finding and reporting asset losses
- Tracking and reporting investment trends
- Identifying business requirements
Related: Learn About Being an Analyst
Risk analyst salary
A risk analyst’s average salary is $90,535 per year. The salary of risk analysts may depend on location, experience, certifications and other relevant factors. Most risk analysts begin their career in a junior analytical position where they earn an average of $40,643 per year. After two to four years of experience, junior risk analysts may advance to analyst positions. With over 10 years of experience and the appropriate skills, analysts often advance to more advanced positions such as senior analyst or manager. Senior risk analysts earn an average annual salary of $101,271 per year.
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How to become a risk analyst
Here are some steps you can take to become a risk analyst:
1. Earn a bachelor’s degree
Although it is possible to get an entry-level job in risk analysis with an associate degree, a bachelor’s degree may give you a competitive advantage over other candidates. Many employers prefer to hire risk analysts who have a bachelor’s degree.
Most risk analysts complete a bachelor’s degree in finance or another quantitative business field such as economics, statistics, accounting or mathematics. Courses in risk management, data analysis and investment provide information that can help you excel once you secure a job.
2. Gain experience
Gaining experience allows you to learn skills that help you perform your tasks effectively as a risk analyst. You can gain experience by completing an internship at a financial firm. You can find internships by looking on job search platforms, meeting with your academic adviser or sending your resume directly to a firm that interests you.
Related: Finance Intern Cover Letter Sample
3. Develop relevant skills
Here are a few skills to learn that can help you complete risk analyst tasks effectively:
- Financial knowledge: You can gain knowledge regarding risk management and compliance principles by paying close attention in your classes and reading relevant publications on finance and the economy.
- Attention to detail: This skill allows you to accurately perform your tasks. As a risk analyst, you may need to review large quantities of data to find the information you need. To improve your attention to detail, meticulously plan your work and avoid distractions while performing tasks.
- Familiarity with technology: This knowledge allows you to use statistics and other analytical tools properly. Risk analysis often involves using different types of software and programs, so try to learn about the most common ones while still in school.
- Problem-solving: Risk analysts use problem-solving to determine the feasibility of different investments or loans. Carefully reviewing each potential solution to one challenge can help you develop your problem-solving skills.
- Communication: This skill helps you present complex concepts to colleagues or supervisors in simple terms. It’s important for risk analysts to be able to clearly state what risks a company is facing and recommend a path for a management group to follow.
4. Become certified
Before pursuing risk analyst positions, it’s important to earn the right certification, which can help you as you advance in your career. The Global Academy of Finance offers a Certified Risk Analyst program in five modules, which includes practical exercises and group sessions to prepare you for the certifying exam.
The Chartered Financial Analyst (CFA) is another well-known certification program you can register for once you gain four years of experience in a relevant field. You can get this certification if you get a passing score on three examinations.
5. Get a master’s degree in finance
Getting a master’s degree in finance, business administration or other finance-related subjects may help you separate yourself from competitive applicants. Although employers don’t usually require it for entry-level positions, a master’s degree can increase your employment opportunities. Completing a post-graduate degree usually takes one or two more years of education after completing a bachelor’s degree.
6. Get a license
If you want to become a risk analyst in the securities industry, an employer may require you to get a license from the Financial Industry Regulatory Authority (FINRA). Getting this license requires employer sponsorship, so you can ask about getting this credential during the hiring process.
