The jobs you’ll do in risk and compliance
Because they're in the 'middle office' of an investment bank, risk and compliance are often bundled together in one catch-all term. In fact, compliance and risk are highly-specialised jobs and your day-to-day tasks vary hugely according to which part of these divisions you end up in.
In risk, if you join a bank as a graduate trainee, you are likely to be ‘rotated’ around at least the top three risk functions listed below. Many risk professionals are also assigned to support specific desks within the bank, such as sales, origination, trading, marketing or private banking.
Risk management jobs:
Market risk jobs: If you work in this function you will be analysing the risk of a group of traded financial products (e.g. stocks, bonds or commodities) falling in value simultaneously because of external events that affect the general performance of the financial markets. Potential sources of market risk (also known as ‘systematic risk’) include natural disasters, economic downturns, terrorist attacks and interest rate changes.
Credit risk jobs: Banks churn out roles in credit risk by the hundreds and thousands. It’s core to every financial product and service they provide and jobs are sometimes tied to specific products. Credit risk is the risk of a company or individual defaulting on their contractual obligation to repay a loan or other debt, resulting in a loss of principal or loss of financial reward. Credit risk is calculated on a borrower’s overall ability to repay – the higher the risk, the higher the rate of interest they pay. Credit risk plays a vital role in the debt capital markets, with high-yield bonds offering more interest because the companies that issue them are more likely to default.
Operational risk jobs: The most niche of the main three risk roles, operational risk jobs are nevertheless in demand as banks’ internal processes become more complicated. If you work in operational risk you will be assessing the risk of your bank incurring damage or losses due to internal factors, such a systems breakdown or employee fraud. Operational risk – sometimes described as risk arising from human error – is specific to the individual bank rather than inherent to the financial markets.
Regulatory risk jobs: As well as the three core functions above, the rapidly changing regulatory environment is opening up more jobs in regulatory risk. These professionals assess the risk of a change in regulations or law significantly affecting a product, investment, department or the bank as a whole – for example, causing a rise in business costs or a reduction in the attractiveness of an investment.
The jobs of compliance professionals can also be divided up into a few common categories – from front-office facing ‘markets advisory’ roles to more centralised ‘control room' positions.
Markets advisory compliance jobs: You’ll be working with the front-office – investment bankers, salespeople and traders – to ensure their activities comply with the requirements of the local regulator. Markets advisory compliance people are typically also product experts (they might specialise in bonds, equities or derivatives, for example) who liaise with structurers and ‘solutions’ specialists to create products that please clients and make money for the bank while still adhering to regulations.
Monitoring and surveillance compliance jobs: The real internal policemen of the bank, monitoring and surveillance professionals scrutinise specific behaviour and transactions that might indicate fraudulent activity, such as insider dealing, conflicts of interest or market manipulation. They compile incident reports of potential breaches, conduct further investigations and then report the final outcome. At large banks covering multiple financial markets – from credit and rates to treasury and foreign exchange – the scope of monitoring required is massive.
Anti-money laundering (AML) and financial crime compliance jobs: AML professionals are tasked with identifying the financial proceeds of illegal activities which have been disguised as being from legitimate sources. AML expertise is highly sought after by banks right now because of the international drive to crack down on financial crime and terrorist financing. Jobs within AML range from know-your-customer (KYC) roles – in which you help verify the identity of clients – to more strategic positions building relationships with regulators and providing internal advice on AML policy.
Control room compliance jobs: These jobs involve firm-wide tasks, such as maintaining the bank’s restricted lists (which restrict confidential information to key individuals), preclearing analyst research reports, tracking transaction flows, and reviewing preclearance requests of staff relating to their outside business interests and personal accounts.