Financial Risk Management

Banks and investment firms face risks that can lead to large losses if poorly managed. The most common types are credit risk, which arises when borrowers do not repay, and market risk, which arises when asset prices move against open positions. The goal of a financial risk management project is to measure these risks accurately and ensure the institution holds enough capital to absorb them.

The work involves building and maintaining risk models, running scenario analyses, and preparing risk reports for management and regulators. You run stress tests to check how the balance sheet behaves under adverse conditions, such as a sharp rise in interest rates or a severe economic downturn. Explaining results clearly to non-technical stakeholders is a regular part of the role.

The main tools are Python, R, and Excel, used alongside risk management systems. Key methods include regression modelling, Monte Carlo simulation, value at risk, and scenario analysis. Knowledge of regulatory frameworks is important: Basel IV sets out capital requirements for banks, and the European Central Bank and DNB conduct supervisory stress tests that banks must prepare for.

Financial risk management work is found across the Banking sector and at large asset managers and insurers. It connects closely to the Risk Manager and Quantitative Analyst roles. In the Netherlands, DNB and the AFM supervise financial institutions and set the requirements that risk management programmes must satisfy.