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As finance changes graduates look to risk-management

LOOKING back a couple of years, it seems as though ignoring risk had practically become a sport among those who drove the banking boom. So much for hindsight &ndash; but it was a failure of foresight that contributed to the financial catastrophes of last year. Foresight in the financial industry is the job of risk managers &ndash; a less than glamorous area of financial services that was previously as unheard-of as it was unsung. But with the City facing an increase in government regulation and a banking environment in which accountability and risk-aversion will carry far more weight than they once did, it&rsquo;s a profession that&rsquo;s set for transformation.<br /><br />&ldquo;The whole area of risk has entered a new paradigm,&rdquo; says Alastair Graham, managing director for Europe of the Global Association of Risk Professionals (GARP). &ldquo;The banks&rsquo; approach to assessing risk has to alter, and it&rsquo;s going to continue to evolve in a pretty fundamental way.&rdquo;<br /><br /> <!--StartFragment--><strong>REASONS TO BE CHEERFUL</strong><br />With their profession suddenly empowered and in the spotlight, risk managers are in the rather unusual situation &ndash; in the City anyway &ndash; of having reasons to be cheerful. In recent research by recruitment company GRS, 800 risk professionals were asked if the credit crunch had been good for them in terms of career advancement and remuneration &ndash; and 63 per cent said that it had. The job cuts that have decimated other front and middle office areas have been far less bloody in the risk sector, with banks relying heavily on risk departments as they adapt to the changed financial landscape. And according to GRS director Adam Nicholl, while bonuses have flatlined in common with other banking areas, some salaries are going up by as much as 10 per cent.<br /><br />Nevertheless, recruitment volumes in risk remain statically low, in line with other banking areas &ndash; for most institutions, organisational headcount freezes remain in place as businesses manage their cost bases closely and assess the lie of the land. But for risk management, a surge in hiring activity is potentially just around the corner.&ldquo;We know that there&rsquo;s massive demand for risk talent at almost every level, but it&rsquo;s not being realised just yet,&rdquo; says David Butters, head of Operational Risk at GRS. &ldquo;Banks don&rsquo;t yet know what shape the new regulations are going to take, and that&rsquo;s going to be the major recruitment driver. When that question has been answered, the tipping point will come and that demand will be realised very quickly.&rdquo;<br /><br /><strong>NEED FOR CHANGE</strong><br />Matt Brown, responsible for the risk department at recruiters Barclay Simpson, also says that from the latter part of this year and into 2010, recruitment activity is likely to rise heavily. But the way risk departments operate will also need to change.<br /><br />&ldquo;The key thing for the development of risk management is for it to become holistic and enterprise-wide, rather than operating in its own ivory tower,&rdquo; he says. &ldquo;Traditionally risk departments have often been too isolated, but for integration to be effective there has to be support at a high level.&rdquo;<br /><br />David Butters believes that a key addition to the risk manager&rsquo;s skillset &ndash; mostly dominated by analytical abilities &ndash; is communication skills. Risk managers, after all, are the &nbsp;bringers of bad news, and to do that effectively, they have to be able to make themselves heard.<br /><br />&ldquo;You have to be able to communicate in very complex corporate structures, and to a board that has different agendas to the risk team,&rdquo; he says. &ldquo;You have to be able to say the unsayable, and say it confidently and clearly.&rdquo;<br /><br />One knock-on effect of risk&rsquo;s increased profile is likely to be a surge in interest in the area among graduates. Whereas in the past it would have struggled to come onto the radar for those looking at entering the banking industry, the increased strategic importance of risk management will see it become a viable alternative for technically gifted graduates looking beyond the contracted opportunities of the front office. There is already increasing interest among MBA students, with GRS entering into partnership with London Business School to bring masters grads into the risk profession.<br /><br />&ldquo;The industry is about to have its day in the sun,&rdquo; says Adam Nicholls. &ldquo;The risk officer&rsquo;s role just got much more strategic, and with regulation just around the corner, dealing with that is their job. It&rsquo;s a fantastic opportunity and it won&rsquo;t be repeated.&rdquo;