The Future Of Risk
The risk market is a peculiar one often moving somewhat independently of the rest of the roles within the Investment Banking and Financial Services sector. Its loose attachment can be attributed to why risk management is needed in the first place. The inverse relationship between risk and return encourages banks to make perilous decisions, which is one factor that initiated the global financial crisis. The repercussion of this is damage limitation and risk management to ensure nothing like that ever happens again.
This aftermath of increased regulation and compliance has fuelled an increased need for risk management. When front office roles in the trading sector were being minimalised and marginalised, the financial services sector was aggressively employing risk professionals, so much so that in 2010 the risk market space was relatively a booming market sector.
The regulations emergent from the midst of the financial crisis created a bubble of thriving opportunity in the risk world and professionals within the community were finding jobs in increasing numbers as the financial world tried to make sense of the new increasingly regulated landscape.
As the financial market adapts and begins to recover to a new plateau of “business as usual”, it should be mentioned that even though in times of adversity the profession can benefit in the short term, for a prosperous community in the long term a strong and vibrant financial services sector is needed.
The majority of roles are now about risk prevention and managing risk both internally and externally and with a growing risk awareness post crisis and with accumulative regulation now in place this has set a stabling foundation for professionals going forwards.
Whilst the market looks positive for risk professionals amidst the modest global recovery we are experiencing, it is also excellent news for risk professionals in the long term as professionals will be less susceptible to shrinking Investment Banks alas front office professionals.
The growing regulatory space has grown to a point of increased segmentation and specialists within varying risk areas are now required by large corporate banks to specialise in areas such as regulatory change, economic capital measurement and reporting, portfolio analytics, risk pricing, customer segmentation and risk IT implementation.
The financial services sector has now began to acclimatise since the global crisis and the short to mid-term prospect of being a risk professional is prosperous, the growing importance of risk or the growing perception of the importance of risk means that the profession is now attracting the best people and with the growing costs and demands of regulation, although nothing new is now leading risk departments to be a leading force in the direction the route financial services sector organisation take.
There has never been a shortage in rules and regulations however with the damage to the sector in terms of reputation, following rogue trading scandals, financial product mis-selling which led to billion pound fines and compensation pools the banking sector now wants to be viewed as getting its house in order and risk professionals are leading the way. Whether the regulations being implemented and the increased costly bureaucracy have the desired effect, well that’s another story altogether. One thing is for sure it’s not a bad time to be a risk specialist.