A risk manager's overarching role is to help their organization prepare for uncertainties, minimize threats to its interests, and mitigate losses. But what do risk managers do in their day-to-day work?
There are different types of risk managers, and each role is tailored to the specific risks that the organization faces. For this reason, risk management often involves unique day-to-day tasks that require specialized skills. Here are several risk manager classifications to help you determine which path is most suited to your interests and expertise.
A risk generalist oversees a wide range of risk requirements (including credit, market, and operational threats) and manages processes designed to eliminate exposure or minimize its likelihood and impact.
Day-to-day tasks for a risk generalist include:
- Identifying, measuring, and analyzing all kinds of threats that are applicable to the organization.
- Keeping up-to-date with ongoing market conditions and shifts, and including these factors in their risk models.
- Liaising with management and communicating key threats that the organization needs to be aware of at the time and in the future.
The top risk generalist skills and knowledge areas are:
- Basic risk knowledge (market, credit, operational).
- An understanding of market risk drivers, including exchange rates, equities, and liquidity.
- An understanding of how risk management creates value and how to communicate this effectively.
- Scenario and stress analysis skills.
- Risk modeling skills and a solid grasp on risk management software.
- Valuation risk categories such as market price uncertainty, model risk, concentration, and unearned credit spreads.
Credit Risk Manager
The credit risk manager minimizes the danger of negative outcomes arising from credit risk scenarios, such as loan defaults or overleveraging, and ensures that the organization is able to recover if a negative credit event takes place.
Day-to-day tasks for a credit risk manager include:
- Designing and implementing credit risk models to assess ongoing potential threats to the organization as well as measures to offset those threats.
- Defining credit risk limits and tolerances for the organization and performing daily monitoring.
- Communicating with management and business stakeholders, and presenting financial analyses and reports.
The top credit risk manager skills and knowledge areas are:
- The ability to analyze and assess credit risk drivers and risk interconnections effectively.
- Risk measuring and methodology design, or selection for risk exposure quantification.
- Scenario simulation and contingency planning.
- An intricate understanding of all kinds of credit risk drivers and their practical consequences (in macroeconomic, industry, company and individual-specific contexts).
- Negotiation and problem-solving abilities, and the ability to work under pressure.
Market Risk Manager
Professionals who manage market risk are focused on how market developments may result in new threats to their organizations. They must identify, quantify, assess, and mitigate such risks.
Day-to-day tasks for a market risk manager include:
- Designing and implementing market risk models that play out hypothetical situations.
- Identifying protective measures to minimize market risk exposure and impact, including early warning alert levels, as well as conducting ongoing monitoring and refining in response to market shifts.
- Real-time monitoring of market conditions, including environmental changes, interest rates, exchange rates, inflation, and supply chain, as well as internal elements, such as organizational culture and workforce behavior.
The top market risk manager skills and knowledge areas are:
- A deep understanding of market risks related to exchange rates, interest rates, equities, liquidity, bilateral country trade relations, and monetary policy.
- Being able to adapt to change and understanding the future direction of market risk management.
- A general sharp eye for market risk hedging methods to provide suitable protection.
- Strong crisis management skills to address sudden negative market developments.
Operational Risk Manager
Operational risk focuses on potential threats that may arise from the interlinked areas of organization supply chain and internal operational flow.
Day-to-day tasks for an operational risk manager include:
- Assessing, measuring, and mitigating the organization's exposure to operational threats, such as supplier problems, political risks, natural disasters, pandemics, cybersecurity threats, and external or internal fraud.
- Tracking and monitoring internal operations daily and making amendments to safety design protocols for optimal risk mitigation, which will increasingly require analysis of cloud software and its organizational dependency and use.
- Investigating the causes of operational risks, developing suitable solutions, and conducting regular detailed reporting of developments to management.
The top operational risk manager skills and knowledge areas are:
- Problem identification (including the ability to spot upcoming hazards) and problem-solving.
- The ability to constantly look for further improvements in all areas of operations, which should include regular revisitation, analysis, adaptation, and renewal.
- A strong ability to communicate with senior management and other key stakeholders.
- An in-depth understanding of the business, including its products, services, and operational processes, as well as a desire to challenge the status quo regularly and ask difficult questions in pursuit of mitigating operational risk.
- Pragmatic, practical solution reconciliation abilities to counteract current operational risks, and the ability to predict future risks.
Software and Technology That Risk Managers Use
Risk managers rely on technology more than ever before. There is a fast-moving migration away from a reliance on spreadsheets and outdated methods of carrying out risk containment. Meanwhile, risk managers must also work to limit the risks that technology itself can bring, such as data breaches.
Purpose-built software can help with a number of risk-related processes that are applicable across risk management roles. These processes include:
- SWOT (strengths, weaknesses, opportunities, threats) analysis.
- Root cause analysis.
- Risk registering.
- Probability and impact matrixing.
- Risk data quality assessment.
Because organizations are exposed to varying degrees of risk in areas such as market, credit, or operations, the types of software they use will depend on their specific needs. For example, credit risk managers may use data analytics and machine learning technology to help with credit scoring or adapt risk limits and tolerances. A market risk manager, on the other hand, may use software that provides real-time market data. Different types of risk managers may also require additional specialized tools for specific needs, such as regulatory compliance and daily communication.
With the migration to cloud technology, the rise of big data, and mounting regulatory demands forcing organizations to adapt, the ability to work with risk management software will only become more integral to the role of the risk manager in the future.
Interested in pursuing a career in risk management? Learn how GARP 's FRM Certification could be the right next step to boost your career.