Not everyone is born wanting to be a
risk manager, and career paths aren't always straight lines. Meet
Michael Nastka, FRM, a young professional who initially envisioned
a career in computer science, before altering his course and
earning degrees in industrial engineering and economics. After
qualifying for his FRM designation, his career took a rather
GARP: What are you are most glad you
did while at university?
Michael Nastka: After setting out
to major in computer science as an undergrad at Cornell University,
I decided that I did not want my day-to-day to revolve around
coding. Being uncertain about what I wanted to specialize in, I
decided to pursue what I thought to be a more generic engineering
field in operations research and industrial engineering. I'm happy
that I chose this area of study, for it opened me to a lot of
possible career possibilities, one of which was risk management.
Looking back, I realize that my course selection covered a number
of topics on the FRM Exam today. With a few sophisticated courses
in statistics and finance, one can have a decent foundation from
which to start preparing for the exam.
Along with my engineering degree, I also
decided to pursue a second degree in economics. While I'm not sure
if having another Bachelor's has substantially increased my
resume's attractiveness, I do believe that having the economics
mindset has served as a useful complement to my engineering degree.
Understanding the bigger picture concerning the economy and stock
market can be invaluable to a quantitative-oriented practitioner --
not to mention, it obviously can help you pass the "what's in the
news?" question on your job interview, give you something different
(besides the chi-squared distribution) to chat about at a GARP
Chapter Meeting, or even serve as an ice-breaker with your nerdy
GARP: What do you wish you had known
about the field when you began your career?
MN: I wish I had known that there
are so many ways to pursue a career in financial risk management.
It doesn't have to be just tweaking risk models and running VaR
I started out as a business analyst in
technology consulting at Accenture creating business requirements
and performing testing for trading systems at large banks, then
transitioned to other consulting roles where I specialized in
regulatory and risk reporting. When consulting lost its appeal, I
decided to obtain the FRM Certification and then get my Masters of
Science in Entrepreneurship. Now, as a research team member for the
FRM Program at GARP, I am devising material for FRM
While I work in the professional education
industry and do not manage risk per se, I consider myself a risk
management specialist. The work I do enables risk practitioners to
develop new knowledge and best practices. If I had known there were
so many options when considering a career risk management, I might
have opted for the FRM Certification sooner.
GARP: As a Certified FRM, can you
offer some words of advice to those who are currently enrolled in
MN: Unfortunately, there is no
"magic bullet" or "secret sauce" for success. I think the best
approach to passing the exam is the old-fashioned one (and the one
I used): hard work and sticking to a study plan. Cramming all of
your studying into the month before the exam will definitely be
stressful, and may not bring the desired outcome.
To assist candidates in their preparation,
GARP has this year created an FRM Exam Preparation Handbook to aid
in the formulation of individualized study plans. Part of
developing and implementing a successful study plan is focusing on
the important things. For this, I highly recommend that candidates
read both the Study Guide and the AIM Statements to better
understand the knowledge the exam tests, and to get insights into
the exam's approach to certain subject areas.
For example, the Basel-related documents are
quite extensive and number in the hundreds of pages, with a great
deal of detail. To give some guidance as to how to approach these
readings, the Study Guide and AIM Statement state: "Candidates are
expected to understand the objective and general structure of the
Basel II and Basel III Accords and general application of the
various approaches for calculating minimum capital requirements.
Candidates are not expected to memorize specific details like risk
weights for different assets." If you hadn't read this caveat, your
approach to studying this section might be sub-optimal.
Another suggestion, although it might seem
obvious, is to solve problems. The FRM Practice Exams that GARP
makes available to candidates should be of significant value in
this regard, as they comprise actual FRM questions from past exams.
As another bonus, GARP's FRM Part I Books now have sample questions
at the end of each section. These new tools should be of great
benefit to candidates looking for that extra boost.
GARP: What is the most important
thing an educator can teach students about risk
MN: That risk management is not
just about what is in the numbers, now more than ever.
Understanding people and processes is critical to many areas of
risk -- a risk manager with a critical eye and questioning mindset
might be more valuable than the top scholar in many senior
management positions. In recent rogue trading incidents, risk
managers failed in their due diligence. Here's an interesting
question to ask yourself: If you had been a bystander to the rogue
trading, would you have been in a position to catch it?
GARP: What do you think fresh
graduates are lacking when they enter the work force
MN: Students can prepare to be
better risk managers by trying to round themselves out with soft
skills like leadership and communication. One way to do this is by
discussing risk management case studies like those in the FRM
curriculum. Many MBA programs use the case study approach to
learning, but a lot of students do not see a case study before a
Masters degree. I, for one, would have benefitted greatly from
learning how to investigate a case study and communicate the facets
of a case at a much earlier stage.
GARP: What are your favorite FRM
MN: I am particularly fond of the
Part I questions on the GARP Code of Conduct. For an exam taker,
these questions may be a bit tricky, just as decisions for a risk
manager can be. The ethics of the risk management profession are
still being solidified and are constantly evolving in my opinion --
a lot of gray areas remain.
The recent changes in compensation
practices, for example, reflect the evolution of ethics. Morals and
values still guide a lot of risk management practices, and these
tend to vary among professionals. I find it interesting to look at
the interplay of these rules of behavior and their importance to
the profession. Ethics and culture will be more highly emphasized
in the risk profession going forward, and the GARP Code of Conduct
will be a part of that future.
GARP: What do you think is missing
from risk practice today?
MN: One might think of behavioral
finance as the final frontier of risk management. Risk practice has
only begun to be influenced by its "younger cousin" field -- though
modern risk management is also rather young.
I became interested in behavioral finance
when I read the new short e-book, "How to Be a Rogue Trader," by
John Gapper. (Disclaimer: I do not have any intention of going
rogue one day.) He explains the psychological make-up of rogue
traders by comparing them to junco sparrows, placing much of the
blame for rogue action on natural instinct. Interestingly enough,
it made sense. By being able to better understand risk-taking
behavior, maybe rogue trading, certain types of crashes, fraud,
etc., could become predictable. And with that, risk management
could become more of a science than an art, as it might be seen
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