If you’re interested in financial risk management, you’re aware that the financial services landscape has been significantly altered by the emergence of fintech companies. But will their growth continue, and do fintechs offer good career opportunities? Moreover, what kind of skills and experience do these innovators seek from prospective employees?
To answer these questions, we spoke with Michael Imerman, Associate Professor of Finance at the Drucker School of Management at Claremont Graduate University (CGU) and co-director of the CGU Financial Engineering program. After working on Wall Street Imerman left to earn a PhD in finance and economics, before switching careers to academia.
His expertise includes credit risk modeling, financial regulation, risk management, and financial technology. Imerman’s latest research focuses on fintechs, and many of his students plan to enter financial risk management.
FRM Quick Takes: What is your advice for people considering risk management as a career?
Michael Imerman: The best thing you can do to jumpstart a career in risk management is to take the FRM Exam…and I’m not saying that because you’re with GARP. It’s a certification that shows your achievement in the field, and it also helps you keep up with the changes. If you want to be a risk manager or go into fintech, then you should take the FRM.
My second recommendation is to explore a specialized master’s program in financial engineering or quantitative finance. It’s important to find a program with a curriculum that’s updated to incorporate the cutting-edge issues and that includes practical applications of the knowledge.
FRM Quick Takes: Given the growth in fintech — which most observers anticipate will continue — would you advise students and early-career risk managers to focus their job searches on fintechs?
MI: I have this conversation with a lot of my students. As existing financial technologies become obsolete, many great opportunities for risk managers will be in fintech. If you’re passionate about how digital transformation and technology are changing financial services and impacting our lives, then working for a fintech could be the right career choice. As management pioneer Peter Drucker once said, “The best way to predict the future is create it.”
Fintechs are exposed to the same risks as traditional financial services companies, but they’re not subject to the same regulations – yet. As fintechs attract more oversight, there will likely be mandates that model risk is addressed, that financial risk is properly quantified and accounted for, and that model validation processes and procedures are in place.
Many fintechs are using sophisticated models that are black boxes, and I think C-level executives will realize they need risk quants on staff. As a result, the demand for risk managers at fintechs should increase dramatically. But they require expertise beyond traditional risk models.
Prospective fintech employees will need to understand validation of machine-learning models, extreme values and tail risk, and models dealing with systemic risk and nonlinear relationships in the economy. Moreover, they’ll need to comprehend the frameworks required to better manage and understand the sophisticated algorithms in use.
Fintechs are already asking questions about these issues, and that will only increase demand for risk managers in the future.
FRM Quick Takes: What skills are important for someone interested in risk management in the fintech space?
MI: In my conversations with recruiters, there’s still a big demand for model validation. A lot of hiring managers I speak with want prospective hires well-trained in the framework and guidelines for model risk management and model validation.
Candidates should understand how to view and analyze quantitative models with a critical lens, and need to know the questions to ask to identify model strengths, weaknesses, and limitations. We can’t always take models at face value.
Coursework in financial markets with real-world applications that provide students an opportunity to get their hands dirty (working with the models and studying actual data) is also very appealing to hiring managers in risk management.
Students get into fintech primarily from two directions. The first is to have a tech background and then catch up on the financial and business skills, either in grad school or by entering into a certification program like the FRM. The other is to come from a business school background and then catch up on the quantitative and technical skills through a bootcamp – or via pursuing a specialized technical master’s degree.
As a professor, sometimes I feel like techies with some financial aptitude might be easier to train and be in a better position early in their career. If the student already has the programming and math experience, the finance and business training is pretty straightforward and requires less of a personal investment.
Finance specialists, however, can certainly have successful careers, if they have that passion for technology and analytics. I’m an example of that, since I was an undergraduate business major who had to take a year off just to catch up on math and statistics classes, before ultimately going on to do a postdoc in financial data science.
Regardless of which knowledge you gather first, if you show a commitment to acquiring the other, you should be fairly easy to place with an employer.
FRM Quick Takes: What should new risk managers expect regarding early opportunities and career progression within fintechs?
MI: In the next few years, some of the most exciting and in-demand opportunities will be at that intersection between risk management and fintech. Being able to adapt to new technology and having an agile mentality is valuable to an early-career risk manager. Can you pivot, for example, as new technologies appear and new data sources and mathematical techniques are being employed?
Skills become obsolete quickly these days. Staying current on the literature and keeping your skillset up-to-date is the best way to prepare yourself for whatever the future holds in fintech and risk management.
FRM Quick Takes: What are your final suggestions for career success?
MI: Communication skills are crucial. A risk manager with strong communication skills and good (but not necessarily great) technical skills will be valued more than a risk manager with off-the-chart technical skills but weak interpersonal skills.
The technical whiz initially may see their career move quickly, but it will stall sooner, as the lack of interpersonal skills will prevent them from moving up. The person with outstanding communication skills – e.g., the ability to cooperate, to communicate technical concepts in an understandable way, and to address conflicts and solve problems – can advance much farther in an organization.
I believe a risk manager’s most important skill is the ability to communicate highly technical concepts in layman’s terms. You can’t tell the chief marketing officer about the assumption regarding the filtration of a stochastic process. Rather, you must present your message in language they understand.
You also need to be aware of non-financial risks that will stress models and impact the bottom line at banks and other financial institutions. Models are not yet equipped for things like pandemics, climate change, and political risk.
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