My current role I got through experience working with large scale databases and spreadsheets, as well as my degree in financial services and risk management (joint honours in the two subjects) and experience working for banks. By "large" I mean such as the one that, printed out, was 15 A3 pages that took me 3 weeks to compile.
A knowledge of/interest in financial products and regulations naturally helps. To manage risk you must understand what the risk is, where it comes from, why it exists, what the implications of not managing it are, and how it can be minimised. Much of which is common sense actually, but as products and businesses improve and change, so risk protocols must do likewise to keep up.
What I specifically do now is Position Control. My manager describes us as watchdogs. Essentially, we make sure that, within the area we cover, all transactions are valid and within accepted parameters. By the former, I mean things like checking the estimate. So, all stock traders have to submit their expected figures based on their calculations, with the system then calculating what has actually happened the next day. Things like manual adjustments, after hours trading, system glitches, human error, etc, can all cause differences, which we reconcile. Where necessary, we actually prevent profit and loss being reported for a trade, so it can be fixed. So, for example, if someone booked a trade but for the wrong amount, or in the wrong direction, or to the wrong account, we could (subject to managerial authorisation at different thresholds) hold it back a day until it's fixed, then report the profit/loss accurately. By the latter, I mean we don't spend hours going over every loss of 10 cents commission on a transaction worth $4 million - but if the 4 million is what's missing, then I'll look into it and make sure I report to the right level of management what I'm looking into and what I've found out about it.
Where we discover issues, we generally have to ensure that they are dealt with so - which means pressuring people into taking the relevant action, since we identify, rather than actively resolve, issues (segregation of duties, Chinese Walls, etc). It's quite interesting, and gets you dealing with a lot of different people all over the world. For me that's mainly US and India daily, but China, Tokyo, Russia, Phillipines, Mexico - it varies often.
We collate our figures through complicated databases and spreadsheets hooked up to the firm's trading, risk management and reporting systems. Naturally, there are plenty of opportunities for tech-savvy people to get jobs forging and improving such system links.
This is what I consider practical risk management. The thresholds, parameters and protocols by which our team operates? Other teams dictated those. The decision as to what level of misplaced money we should be investigating, why it should be there, the implications of that - that is all financial risk management.
edited 3rd Oct '12 1:02:09 PM by CaissasDeathAngel
My name is Addy. Please call me that instead of my username.