Risk is an inevitable part of doing business no matter what industry you’re in or what goods or services you provide. Deciding how to think about and manage risk, however, is the difference between success and failure. This is what risk management is about – identifying and mitigating risks as much as possible while still allowing an organisation to make bold decisions. After all, an organisation is not created to manage risk. The purpose of most, if not all, organisations is to create value.
However, all value creation requires a decision and all decisions carry some element of risk. Indeed, the bigger the decision, the greater the risk – and the potential reward! If an organisation can think strategically about risk and then embed sustainable risk management responses into its organisation, it will be better placed to anticipate and respond to future risks and circumstances.
A career in risk management means making a choice about two things – the type of sector and the type of risk.
Choosing a sector means simply deciding if you would like to consult on risk, for example, as a consultant at an accounting firm, or manage risk ‘in-house’ at a corporate.
The decision to work for a professional services firm or in-house is a classic dilemma for many graduates. If you choose to work as a risk consultant, you will have a greater variety of projects across multiple industries and locations. If you choose to work in-house, you will gain greater in-depth knowledge in a specific industry. Either way, your work will differ most depending on the type of risk. For example operational, financial, compliance and security.
Operational: all organisations have processes that define their business, for example, manufacturing, supply chain and marketing. It is important to understand if these processes are working well and if there is a risk of failing to meet management, investor or industry expectations.
Financial: there are numerous financial risks associated with running a business. For example, credit risk, which means failing to make required debt payments; liquidity risk, which means not having enough cash flow; or market risk, which means changes in factors such as interest rates, foreign exchange rates and commodity prices.
Compliance: this means ensuring an organisation meets all its regulatory or compliance obligations. A bank, for example, must make regular filings to APRA or face penalties.
Security: with increasing globalisation and technology, ensuring an organisation is secure, for example, against cyber attack is a growing priority.
As a graduate working in any of these areas, your work will typically involve constantly scanning the business environment to identify changes in market factors, competition as well as trends.
Some graduate risk management roles require more quantitative analysis such as scenario analysis or modelling to understand the potential impact on a line of business or new product. Other less quantitative roles may require you to take a more strategic view of risk and make recommendations for mitigation.
Risk management provides a solid foundation – you will understand how businesses operate and how they are affected by the change.
If you begin as a risk consultant, you may either continue progressing to partner level within your firm or instead move in-house, for example, to a retail or investment bank. Moving in-house may result in increasing specialisation, for example, as a portfolio risk or model validation analyst.
If you are working for a large accounting firm, like many other specialisations, you will have the opportunity to move to other advisory areas such as audit or consulting if you decide the risk is not for you. Like other specialisations, a lateral move is easiest earlier in your career.
Choose this if you have: