Starting and operating a business is not an easy thing to do. At every step of the way, there are various obstacles and threats that need to be overcome for the success of the business. This is why risk management as a function is critical in any organization. Risk management professionals (like risk analysts) can reduce the probability and impact of negative effects from events ranging from natural disasters to financial risks.
- Risk analysts can work in a variety of industries and departments
- Risk analysts are responsible for evaluating the level of risk involved in different business decisions
- The work of risk analysts helps inform how a business operates
- Risk analysts require a myriad of skills including quantitative analysis, strong research skills, problem-solving capabilities, and the ability to distil complex information for everyone to understand
- The most widely recognized certification in Canada is the Canadian Risk Management (CRM) Designation
- Some tasks performed by risk analysts include monitoring a company’s risk exposure and conducting scenario analyses to inform business strategy
What is Risk Analysis?
The definition of risk is the uncertainty about the effects of a certain activity (in particular, negative effects). Therefore, risk analysis refers to the process of assessing how likely it is that an action will have negative consequences. In the business world, this usually refers to uncertainty in terms of financial losses, impacts on returns, economic factors, and the probability that a project fails or succeeds.
Typical risks that are monitored in any business operation include:
- Economic risk
- Compliance risk
- Security risk
- Financial risk
- Operational risk
- Public relations risk
- Supply chain risk
Risk analysts can work in a range of industries like sales, marketing, financial services, or technology. That being said, they are typically employed by companies like insurance firms, financial services firms/banks, government organizations, and engineering/construction companies. The profession itself also has different specializations one can go into, such as financial credit risk.
Overall, a risk analyst is responsible for evaluating the level of risk involved in making specific business decisions. This often includes quantitative analysis of a business and its risks. Risk analysts identify what could go wrong in a course of action and the extent of the impact of these risks. There are also key several skills that are helpful to success in the risk analyst role.
These skills may include:
- Strong quantitative analysis skills
- Financial modelling skills
- Ability to distil complex information
- Research capabilities
- Problem-solving skills
- Strategic thinking capabilities
- Communication skills
- Adaptability in any situation
- Strong planning and organization skills
- Ability to navigate through uncertainty
- Negotiation skills
- Numeracy skills
- Knowledge of industry regulations
- Ability to quantify risks
- Ability to work well under pressure
- Good attention to detail
- Strong business acumen (check out our article on how to improve your business acumen here!)
Qualifications and Certifications of Risk Analysts
What else does it take to become a risk analyst? Every firm will have requirements that vary, but in terms of qualifications, many firms look for a candidate who has an educational background in areas such as management, finance, accounting, statistics, or economics. A bachelor’s degree in any of these fields is relatively standard among applicants. That being said, don’t be discouraged if you don’t have one. If you can demonstrate strong experience or expertise in other ways, you can still be a good fit.
As for certifications, the most widely recognized certification for risk professionals in Canada is the Canadian Risk Management (CRM) Designation. This designation provides risk professionals with the knowledge and skills needed for the profession and industry. The CRM Designation is given by the Global Risk Management Institute (GRMI) and is recognized by RIMS (the risk management society), a global not-for-profit based in New York, that is committed to advancing the risk management practice. To get the designation, one must finish three courses provided by RIMS, locate a course provider, pay for and register for an exam, and then pass the exam. After this, the CRM Designation is achieved and recognized. Globally, the only competency-based risk management certification is the accredited RIMS-Certified Risk Management Professional (RIMS-CRMP) certification.
Though these programs are not required to the practice of being a risk analyst, having these designations can help you to stand out from others in the professional world. They can also provide you with a network of professionals in your field and knowledge you may not necessarily have gained from the workplace or your studies.
Risk Analyst Duties
So, what exactly do risk analysts spend their days doing? Specific tasks will be different based on what industry a risk analyst works in, what their specialization is, and what department they fall under. However, here is a list of general key activities that a risk analyst may be responsible for in their day-to-day work:
- Identify and communicate risk metrics to decision-makers
- Develop and maintain risk management policies, guidelines, standards, and processes
- Analyze risks associated with different decisions and propose the best course of action
- Perform data mining, modelling and analysis to properly document and report on risk factors
- Forecast, track, and measure key business metrics (for example, credit quality)
- Develop risk models to demonstrate and track findings
- Research, gather, and review data relevant to ongoing or proposed projects
- Conduct scenario analyses to inform business strategy
- Work with managers to complete month-end/quarter-end closing and reporting procedures
- Improve processes and/or streamline workflows
- Monitor the company’s exposure to various risks
- Monitor changes in industry factors such as the foreign exchange rate, commodity rate, and market performance
In terms of salary expectations, for Canada, the average salary of a risk analyst is $78,250 CAD annually (which comes out to $40.13 per hour), based on data from Talent.com. According to the same source, entry-level position salaries will start at around $59,000 CAD annually, while salaries can be upwards of around $107,000 CAD annually for those with increased experience.
In the United States, the average risk analyst salary as reported by Indeed, is $72,105 USD per year, with companies paying risk analysts well over $100,000 USD per year depending on what industry they are in.