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A financial risk manager minimizes activities that could negatively affect a company’s bottom line by considering financial obligations to creditors, using forecasting, and opposing risky new product or service ideas. They usually hold a bachelor’s degree in business, finance, or accounting, and may have certifications in risk management.
A financial risk manager reviews a company’s day-to-day functions and works to minimize activities that could negatively affect the company’s bottom line. Financial risk is the possibility that a company will be unable to meet its financial obligations to its creditors. These creditors can be suppliers, government, shareholders or even employees of a company. A financial risk manager considers all these possibilities and makes suggestions or creates processes and procedures to minimize the possibility of financial difficulties.
One of the tools that a financial risk manager uses is forecasting, also known as hedging. By considering the current economic atmosphere and comparing it to similar atmospheres in the past, a financial risk manager can create programs or take preventive measures to ensure that a company can meet its financial obligations. The job is not always welcome at a company because the position often requires a financial risk manager to oppose a company’s new product or service idea. If the new idea has too many risks, such as when it could result in a large loss of funds for the company, if the product or service fails, and if the potential profits from the new venture are not enough to make the risk worthwhile, the manager of financial risk may refuse to approve the project.
An example of a financial risk manager is a loan underwriter. If a business or individual approaches a lending institution and requests funding, the underwriter will review the application, the potential borrower’s financial health, and whether the loan will make the bank money or possibly lose money. If the underwriter considers that the probability of the debtor not paying the loan is very high, he may refuse the loan, reducing the risk of the bank losing money with the transaction. If, however, the underwriter feels that the borrower will actually repay the loan, the underwriter will approve it and the bank will make a profit from the transaction in the form of loan fees and accrued interest.
A financial risk manager usually holds a bachelor’s degree in business, such as management or accounting. Many risk managers are accountants and therefore also hold a license and certification as an accountant. There are also certifications available in risk management. Typically, a bachelor’s degree in finance, passing certain exams, and sometimes work experience and continuing education courses are required.
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