Risk Management in Investment BankingSubscribe
I have accepted a Risk Management job at a large (too big to fail) bank in NY, i-banking division.
- What is the job like in terms of hours/pay/experience/exit opportunities?
- How difficult is it to move into a hotter division, say, i-banking or LevFin? Do you know anyone who moved from middle office to front office (anyone from RM?)?
- If it can be done any tips on what to do (if I feel unhappy about RM job, should I talk to HR right away or wait for first evaluation)?
- If you were to rank RM jobs on prestige, 1 being BO ,say IT, and 10 being i-banking, what would you assign?
- How driven are the analysts in Risk Management (based on your observation, experience)? Is it difficult to stand out?
Overview of Risk Management in IB Division
OP, User @RiskyLVRG", an investment banking analyst, returned to share their answers to their previous above questions. The post has been edited below for readability.
Skill Development, Client Interaction, and Hours in Risk
I believe that the bank you work at matters a lot. Goldman or Citi Credit Risk is very different from credit risk in, say, Wells Fargo or Key Bank. The transactions I am working on are exciting and teach me a lot.
Skills Needed For Risk Management
- The ability to structure a solid covenant package for a deal.
- Modeling LBO's for leveraged names.
- Modeling regular DCFs when the package is secured by the assets of the obligator.
Some analysts are just superb, know modeling very well, and have insight on credit in addition to business knowledge.
Day to Day Work of a Risk Management Analyst
The analyst class is divided into industry groups - some groups have clearly more deal flow than others and others deal with sponsors more but switching groups is allowed once a year.
Back office type stuff takes about 20% of the day - that involves sending out approval e-mails, tracking stuff in the system, talking to the back office to figure out system errors. The rest of the day is spent on working on live deals or doing a routine credit review.
Client interaction only occurs at the senior level which means vice president and up. The senior team is often invited to meetings with potential clients.
Lifestyle in Risk Management Banking
Hours are less crazy than banking, but one can expect to stay past 7 every night - on average I leave around 9 PM and have to be at work at 9. Some weekends and longer nights are usual. So the hours are lighter but not by much.
Pay, Internal Mobility and Exit Opps for RM
The bonus is about 30% less than the banking peers, but at least I have a chance to have my life - I am planning on going back to b-school and transitioning into an associate role in banking later on, not sure I would want to be an analyst.
Moving from middle office to front office is possible. Many of my colleagues moved after their second year, but once again, it depends on the personality and lifestyle.
Exit opps can be the same. Some people go to distressed debt hedge funds, some join PE firms, some start working in banking. Generally, options are more limited, but not scarce at all given you get involved work on live deals and learn to model. In 6 months I have worked on numerous deals but closed only 3:
- $1.5 Bn revolver for a Tech company
- $170MM Term Loan for a Media Company along with a $25MM RCF
- Convert and bond issue for a tech company. This included structuring covenant and covenant levels
Credit Risk Management Analyst Position Overview
Very few analysts would want to stay in credit risk since the upside is indeed limited and the hours for an associate or a VP are close to banking hours.
As a summary, Credit Risk in a bulge bracket bank is a great job for someone who wants better work-life balance and is not willing to work 9 hours more a week for a 30% bump in salary.
Learn more about risk management with the video below.
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