Risk analysts work behind the scenes helping businesses make wise decisions. An analyst's responsibilities depend on her employers' business and her area of specialization.Common ares of focus include credit, market, operational or regulatory risks but some analysts assess multiple areas. Overall, their job is to help companies protect their resources, navigate challenging business situations and avoid excessive risks.
Credit Risk Analysts
Credit risk analysts work for banks, credit card companies, investment companies and credit rating agencies. They determine whether a company's clients are likely to pay for goods or services obtained on credit or if clients are likely to default on loans. Consider a small business that approaches a bank for a loan. The risk analyst gathers information about the business such as its revenues, current debt obligations, inventory and credit history. Then, the credit analyst decides whether the bank should lend, and if so they may outline the suggested terms of the loan.
Market Risk Analysts
Market risk analysts consider how external factors, such as commodity prices or interest rates, can impact a company's financial performance. These analysts commonly work with financial firms and trading companies, helping them to assess risk versus return and to reduce volatility in their operations. J.P. Morgan says market analysts research, investigate and provide opinions on complex portfolio risks and significant trades. They also use analytical techniques to assess market risks and advise senior leaders on the identification, monitoring and control of those risks.
Operational Risk Analysts
Operational risks are potential losses caused by internal factors such as weak controls or staffing issues. There isn't a single method to managing this category of risk. The Federal Reserve Bank of San Francisco states that effective management requires each firm to employ various methods. Operational risk analysts identify potential problem areas within the organization and report them to senior managers and directors. They test controls and propose solutions to address internal issues like employee fraud or system vulnerabilities. Operational risk analysts also help companies guard against reputation and political risks.
Regulatory Risk Analysts
Regulatory risk analysts consider how legislation impacts a company's operations. They study new and proposed laws to determine how they will apply. Their assessments often involve researching the impact similar laws have on businesses in other jurisdictions. They employ models that consider various possibilities and they issue recommendations or develop policies for compliance. Lawmakers often provide an open-comment period before new laws are finalized. An analyst may be required to respond on her company's behalf or prepare management for entering the debate.