How to get a risk management job in banking and finance

• Risk management jobs involve identifying, quantifying, and mitigating the risks inherent in a financial services firm’s activity.
• There are all kinds of risk in financial services and all kinds of risk managers. The risks include market, credit, operational, and liquidity risk.
• Banks can fail (eg. Credit Suisse, Lehman Brothers) and banks are heavily regulated by government bodies.
• Risk management roles can be lucrative, and can offer better work-life balance than other divisions in a bank.

If you work in risk in the financial services industry, your role will be to help prevent your employer from becoming the architect of its own destruction. With new AI technologies becoming widespread, risk management is becoming more important than ever… it’s also becoming a field very susceptible to that same technology.

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What kinds of risk management jobs are there in finance?

There are four broad kinds of risk you need to be aware of: market risk, credit risk, operational risk, and liquidity risk.

Market risk reflects the risk of loss from changes in market prices, yields, and volatilities and correlations. At its heart, market risk provides a gauge of sensitivity of P&L, and ultimately capital, to changes in market conditions. Its core responsibility is to identify, measure, monitor, and control exposure to these risks in accordance with a bank’s size, risk capacity, and overall risk appetite, and to report on these exposures to senior management and the board. The fundamental role of market risk management is to ensure that management is fully informed about the risk profile of the bank and to protect the bank against unacceptably large losses resulting from the concentration of risk.

Credit risk is the potential that a borrower or counterparty – a person or entity that owes money - will fail to meet their payment obligations. The goal of the credit risk management function is to keep a company’s credit risk exposure within predefined credit limits. These are usually calculated at the issuer, currency, industry, country, and regional levels. About half of all bank assets in the US consist of loans, making them the largest single source of credit risk, but banks also incur credit risk in their investment portfolios. This is usually in the form of bonds and in their trading books, but also through counterparty and settlement risk (i.e., the risk that a trade doesn’t settle properly). In addition, banks also take credit risk via guaranties and letters of credit.

Operational risk is defined by the Bank for International Settlements as the risk of loss resulting from inadequate or failed internal processes, people, and systems, or the risk of loss from external events. Operational risk typically includes legal risk but excludes strategic and reputational risk. Some of these risks result in actual financial losses, while others lead to inefficiencies, lost opportunities, and other indirect costs. In essence, operational risk captures those direct and indirect risks not captured by market or credit risk. If you work in operational risk, your role will be focused on the maintenance of an effective control environment within a firm.

Liquidity risk is a different type of risk altogether and is one which has come under increasing regulatory scrutiny since the 2008 financial crisis. Liquidity risk gauges an organization’s ability to meet its immediate cash obligations to its creditors. It sounds simple, but it’s not. Ready cash in a financial institution comes from bank balances, the capacity to borrow, and the ability to sell (or “liquidate”) assets without suffering severe losses. Meanwhile, obligations incurred include loan and bond interest and principal, contractual obligations to lend, and derivative securities commitments. Failure to meet any of these obligations can have severe repercussions, up to and including bankruptcy. The liquidity risk function in a bank measures and monitors sources and uses of cash, including both those of a fixed nature and those driven by markets and client behavior.

Career paths in risk management

How your career evolves in risk will depend upon the area of risk you go into. For example, career paths in market risk often start out in desk coverage or in the reporting function. The reporting function conveys to management and the board the risks associated with trading activity, decomposing them into their core equity, commodity, interest rate, foreign exchange, and volatility components. They aggregate risks by type and compare them with the firm’s risk limits, ensuring that risk-taking is within management’s risk appetite.

They also calculate statistical measures of risk, including Value-at-Risk (VaR), and run stress tests to ensure capital adequacy. This reporting is done on both a regularly scheduled and ad-hoc basis. 

Once you’ve done your time in reporting, you might move into desk coverage. This is the process by which teams of risk management staff are assigned to cover specific trading desks. These teams are co-located with the trading desks and are actively involved in the new products process, model implementation, regulatory and management reporting, and limits monitoring. Staff in these areas are expected to monitor market conditions closely and be able to articulate clearly what the risks are in any particular area. They are also expected to understand and leverage IT infrastructure to get information.

An increasing number of people in this field are risk quants. They generally evaluate the models made by quant researchers to assess how risky they would be to implement in an active trading strategy. Some of these roles blur the lines between risk and trading; central risk book quants often deploy trading strategies to hedge against the risk of more traditional trading desks.

Credit risk analysts usually start out by doing financial statement analysis in the case of issuer credit risk. For counterparty credit risk, new analysts focus on how expected exposure is measured, aggregated, and reported.

Many credit risk professionals stay in the credit risk function for extended periods in their careers. They often manage groups of credit analysts and become specialists in particular industry areas like media, energy, or hospitality. This specialization requires them to become experts in their fields both with respect to the balance sheets of the companies involved and in the fundamentals of the business itself. From there, some move on to manage credit exposure in hedge funds, pension funds and mutual funds. Others can apply their knowledge of how cash moves through a business in the private equity business, where financial statement analysis is a core competency.

Operational risk as a career path has only really existed since the early 2000s. The people engaged in operational risk since it became a focal point of the Basel Committee on Banking Supervision (also just known as Basel) are thus career trailblazers, establishing new career paths. Currently, many op-risk professionals are expanding into cyber risk management. Environmental risk management was also popular, but may have lost its lustre in the current political climate. In these new areas of interest, the skills associated with event risk identification and event reporting are highly valued, as is the development of risk appetite frameworks.

Liquidity risk management as a discipline is also relatively new, although banks have been managing liquidity for years. New analysts here tend to focus on particular areas within liquidity risk like balance sheet management and analysis, repo and reverse repo markets, or regulatory reporting. There is frequent movement in both directions between the bank treasury and liquidity risk management areas as the skill sets required are fungible. Liquidity risk management skills are also readily applicable in both nonbank financial institutions and in corporations, where cash management is just as important.

Which skills and qualifications will you need for a risk management career?

Read More: What skills and qualifications do you need for a career in financial risk management 

If you want to work in risk, you’ll need an inherent interest in the way markets and companies work, an appreciation of the importance of process, and a core level of analytical/quantitative competency. Economics and finance degrees are common because of this, but STEM degrees are valuable in quant risk and law/accounting degrees can be equally valuable depending on the type of risk jobs you’re applying for.

While many are attracted to the financial rewards of a career in finance, the primary requirement is a curiosity – about companies, products, and markets. You really need to look at the markets and companies the way an entomologist studies a beehive. People drawn only to the financial rewards often burn out – or, at a minimum, they are often less willing to devote the time and effort required for success. If you are not naturally drawn to markets, this may not be for you.

Both market risk and liquidity risk are heavily dependent upon econometrics, statistics, and of course finance. There is a great deal of on-the-job training, but having a basic background in these areas is very helpful. Since rates of change are often of interest, calculus is also important.

Counterparty credit risk is dependent on market conditions and therefore it helps to understand markets. Issuer credit risk is more focused on financial statement analysis because these statements reflect a company’s financial health. Therefore, here, an understanding of basic accounting is essential. An understanding of corporate finance and how firms manage their capital structure is also helpful.

There are additional qualifications that can supplement your risk career, too. Although some risk professionals carry a Chartered Financial Analyst (CFA) qualification, the more specifically relevant qualifications in the field are the Financial Risk Manager (FRM) qualification and the Professional Risk Manager (PRM) qualification.

How is AI affecting careers in risk management?

Read More: How AI is changing jobs in financial risk management 

Risk management can often be a laborious job, poring through large amounts of complex data so that you can present it in a clear meaningful way to management. Incidentally, this is something AI does very well; the technology will either make your job much more impactful or it will get rid of your job entirely.

Multiple major banks are implementing multi-year plans to reduce headcount and replace ‘lower-value human capital’ with AI. Risk is often included among that group. Goldman Sachs has identified multiple workstreams “ripe for disruption” that employ risk staff, including enterprise risk management, KYC and regulatory reporting.

If you survive the potential impending cull of risk staff, you’ll be burdened with the responsibilities of the people that did not. The nitty-gritty aspects should be dealt with much faster thanks to LLMs, which can analyze more complex documents and provide more meaningful data for you to analyze and present.

Some roles are safer than others. Petter Kolm, head of the mathematics in finance masters program at NYU Courant, said that the risk roles least susceptible to AI include "counterparty-risk quants, junior model-risk analysts who need to challenge model assumptions, and quantitative risk analysts interpreting stress results rather than just producing reports."

Salaries & bonuses in risk management

Read More: How much do risk jobs in investment banks really pay? 

Compensation in risk roles are not as good as they are in front-office roles such as investment banking and sales & trading, but they’re still pretty healthy.

Our 2026 Salary and Bonus report showed that risk staff earned an average of $247k per year, making it the highest paying middle-office function by some distance. Risk staff work just over 50 hours per week, meaning hourly pay is a respectable $94.

Pay varies depending on which sector of risk you work in. At managing director level, a market risk professional in London can expect to earn an average salary above £300k while someone in operational risk will earn closer to £160k.

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