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Comments (24)

May 10, 2022 - 8:42pm
Isaiah_53_5 πŸ’ŽπŸ™ŒπŸ’ŽπŸ™ŒπŸ’Ž, what's your opinion? Comment below:

Risk is variability.Β 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 12, 2022 - 3:10pm
Isaiah_53_5 πŸ’ŽπŸ™ŒπŸ’ŽπŸ™ŒπŸ’Ž, what's your opinion? Comment below:

I was just quoting my professor. She teaches at Columbia University.Β 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 10, 2022 - 9:04pm
theATL, what's your opinion? Comment below:

What are you trying to answer? In the "real" world people don't refer to jobs as middle or front office, that term is thrown around here a bunch but I almost never hear it in a professional setting.Β 

Jobs, groups, departments have different sets of responsibilities. Risk groups can have different responsibilities at different firms (some more cross cutting, some play a larger role in how a division is run, others much smaller, etc) but your question is hard to engage with.Β 

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May 10, 2022 - 10:03pm
Isaiah_53_5 πŸ’ŽπŸ™ŒπŸ’ŽπŸ™ŒπŸ’Ž, what's your opinion? Comment below:
early_morning112

Anything that's not IBD is not front

Have you forgotten about management consulting?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 11, 2022 - 8:28am
GoingToBeAnMD, what's your opinion? Comment below:

Are you doing this to find a job? If so, then you should take the time to learn about the appropriate way to think about the Risk department.Β 

Most Risk professionals don't think of themselves are FO or BO. It's more about where you work to monitor risk, this is referred to as first line, second line and third line.Β 

Your role in the process determines which line you are in. Generally speaking, it goes like this:

  1. The manager at local office/branch that monitors their credit operations is first line
  2. The manager in Risk that creates & enforcesΒ policies for the local managers to follow is second line
  3. The manager that creates tools to monitor risk and monitors them across the enterprise and gives second line a list of breaches to investigate is third line. This line can also be enforced by audit; audit is commonly referred to as third line.Β 

I'm giving a general example above but you should be able to see how it applies to any number of operations a bank does and why the FO/BO designation really doesn't make sense. If you start talking with a Risk professional about FO/BO they're going to look at you like a rube, but if you ask which line they work in then you sound much more sophisticated.Β 

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May 11, 2022 - 10:15am
IncomingIBDreject, what's your opinion? Comment below:

Please ignore GoingtobeanMD's response as it relates purely to IT/systems risk which is not relevant to your question. Risk like finance is a horizontal function that spreads across departments and what you want specifically is the credit/lending area not the IT area.

Not to shill too much here but in my opinion risk is one of the best areas to be in when looking at the WLB/interesting work/comp trade off.

Anyways regarding your question I will speak to corporate banking credit risk as that's what I believe you're asking.Β 

This area of credit risk focuses on determining whether to approve or deny a loan to a business and the maximum loan amount to lend that business. While the relationship managers/MD are the ones wining and dining clients and their specific team working on drafting a lot of the execution based documents, the credit risk group is building financial models with many scenarios to determine what type of cash flow the business will get in the future or if the business will go bankrupt. Some of you who are more familiar with debt may be wondering why doesn't the bank just use the popular bond ratings from S&P, Moody's, etc? There are a couple reasons for this. One is that the business being rated by these agencies is often the ones paying for the service. Hence, there is an incentive in cases where a judgement call is needed for these rating agencies to round up their rating score. The difference between one bracket and the next may not be that material for those who use the scores as a rough guide, but when we are talking about multi million dollar loans, it absolutely matters. Another reason is that bond ratings are aggregate level probabilities. What this means is that if a company has a bond rating of A, there is an associated probability that the company defaults. But there are no additional factors taken into account such as forecasted financial ratios. Those are used to create the rating, but even within companies that are an A, some will be more creditworthy than others, so to get a more precise understanding of a company, more factors need to be taken into account.Β 

By definition this role is an MO role as the group directly works with FO who directly works with clients. However credit risk has a very important role in the credit lending process so Id argue they aren't any better or worse than the relationship team. Certain personalities will be drawn to one, others to the other.Β 
Β 

PS what does your emoji mean?

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May 11, 2022 - 11:08am
TheDuchess, what's your opinion? Comment below:

Correct, I was referring to credit/market risk. Thank you for your response, it was tremendously helpful and it made my day actually. The emoji? Just to add some personality, most people on this app don't οΏΌshed a tear of personality in their posts, so I figured why not? πŸ˜„Follow up question(s): as an incoming summer risk analyst what kind of topics should I familiarize myself with before my internship?

May 11, 2022 - 10:26pm
IncomingIBDreject, what's your opinion? Comment below:

Credit and market risk are completely different. Also within credit risk, there is retail and business/corporate so I want to make sure you're telling me the correct group because the advice varies tremendously.

For business/corporate credit risk I would recommend CFI's CBCA program. I've done the program and think it's very well done. Do all the electives as well because it will expose you to different scenarios you may encounter. I doubt you'll have time but if you do, go through their FMVA program (no need to do every elective). WSO's financial modeling program is admittedly more in-depth but you don't necessarily need that level for credit risk and the FMVA program doesn't cost more since you're paying for CBCA (assuming you complete both in a year).

I do want to emphasize that risk at the business level isn't formulaic or info you memorize, cram and regurgitate. Risk is aΒ way of thinking.Β Quants have taken over risk that is much more mathematical or formulaic in nature (retail credit risk), so what is left for the fundamental people is scenarios where the answer isn't clear cut and requires some thinking. I'll leave an example with you. A beer company plans on opening a distillery in Utah and the bank's share of the syndicate loan is $10MM. What would be some unique considerations regarding this loan request that need further qualitative analysis?

Regarding your emoji, I wanted to know what it meant not why you used it.Β 

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May 11, 2022 - 12:09pm
HΓΆlder, what's your opinion? Comment below:

The way I think about it is this:

Front office: You are one of the faces of the bank as in clients actually see you when they are doing deals. Even if you are an analyst, you may be CC'd in client emails so the client sees your email and may even email you directly. In most cases I think risk would not qualify as front because I don't see many reasons a client may need to speak to a risk person directly.

Middle office: The client does not need to speak to you directly for their deals, but a FO person involved in the deal may need you to close the deal. For example, if the bank is going to supply the funds for an LBO then a risk assessment is requested for approval. In this sense I think risk would be middle office however I think not all risk roles are like this.

Back office: You are not involved at all in deals - you just carry out the day to day operations of the bank. Technically you are needed, but neither the client nor the FO people working on deals will ever need anything directly from you. Your work is done silently for the most part. I think some risk roles also fall in this category. Many risk roles are mostly about the day to day monitoring of the bank's risk and also regulatory risk reporting which has nothing to do with the bank's deal, it's just a necessary function for the bank to run without getting fucked by the US government.

May 11, 2022 - 5:50pm
Isaiah_53_5 πŸ’ŽπŸ™ŒπŸ’ŽπŸ™ŒπŸ’Ž, what's your opinion? Comment below:

Were these guys in Margin Call front office or middle office?

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"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 12, 2022 - 9:08am
petight, what's your opinion? Comment below:

In the film they worked in risk for securitisation, one on the right was an analyst and on the left an associate. I would have said middle office, they were not traders or salesmen themselves. Maybe front office if they were also involved in structuring, but they worked for the risk manager who gets fired at the start.

May 12, 2022 - 8:05am
Nortusfitness22, what's your opinion? Comment below:

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May 12, 2022 - 10:35am
GoLiftSomeWeightsBro, what's your opinion? Comment below:

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