Risk Management in Investment Banking

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I have accepted a Risk Management job at a large (too big to fail) bank in NY, i-banking division.

  1. What is the job like in terms of hours/pay/experience/exit opportunities?
  2. 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?)?
  3. 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)?
  4. If you were to rank RM jobs on prestige, 1 being BO ,say IT, and 10 being i-banking, what would you assign?
  5. How driven are the analysts in Risk Management (based on your observation, experience)? Is it difficult to stand out?

Thank you.

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.

https://www.youtube.com/watch?v=fZ5_V4RW5pE

Read More About Risk Management on WSO

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Comments (162)

 
Mar 6, 2011 - 4:39pm

It surely depends on the specific role. A lot of stuff in market risk (S&T side) seems to be quite boring work, but I've heard quite different things for credit (IBD side). Also it depends a lot on the bank. It is probably the most changing area atm, where some banks are trying to get more excellent people into. As far as I've heard that is notably GS and JPM..so some roles have pay (including bonus) on par with the corp financiers at the analyst/assoc. lvl, but I don't know anything about that for VPs and above. Hours can be demanding, but not as crazy..you'll not go home at six everday, that's for sure.

I don't really know much about exit opps, but it depends on what you want to do. The roles are also sometimes divided into industry teams..so I guess if you end up doing Fin. Sponsors you could have a shot at PE firms..but I am not too aware of this. Changing over to a core IBD role is prob possible after 1-2years, but it gets tougher after.

I can't answer all of your questions, but I guess you see that a lot depends on the small details..area, bank, industry etc etc..hope it kind of still helps. Probably the best role you can have is an industry-specific credit job where you cover multiple clients. Your experience should be good and you'll have some decent money for a better work-life balance. The cost of it probably stems from lower prestige & short-term driven exit-opps. But honestly, if you like your role, who cares ;)

 
Mar 8, 2011 - 9:04pm

I've heard good and bad things about risk management - this is the banking side, not S&T market risk. The transactions you are working on is going to be the same in and out, nothing too off of the beaten path. There are a lot of "maintenance" type work that is done, and some involve systems, back office type exercises.

Exit opps are limited. To move to IB would take a whole lot of networking, expressing interest to move to this and that group, and trying to make a switch at the very least after your first year, if you can't get your 2nd or 3rd year in a desired front office position the next best bet is to apply for bschool, which wouldn't be a problem if you have a BB name on your resume. The biggest problem about risk management is that you don't learn nearly the same skills that an IB analyst does which is why it constrains you to a few "not so hot" areas of the bank. Some say risk management is middle office, but they sure do a lot of back office type stuff.

All that said, work life balance is fantastic, and my friends who do it leave around dinner time every day. Bonuses are around 1/3 of IB analysts on average, and by the time you make VP your base will suffer tremendously vs IB VPs, mainly because with IB VPs they are at least facing clients and developing relationships whereas in risk management those VPs are more the portfolio managing, systems issues go to types.

 
Best Response
Mar 8, 2011 - 11:47pm

Everyone,

Thanks a lot for the feedback! After working for half a year I am ready to provide some insight myself.

  • 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.

  • Essentially, credit risk skills are: learning how to structure a solid covenant package for the deal, modeling skills are required - so far I have modeled LBO's for leveraged names and prepared a ton of regular DCFs when the package is secured by the assets of the obligor.

  • Hours are less crazy than banking, but one can expect to stay past 7 every night - on average I leave around 9PM and have to be at work at 9. Some weekends and longer nights are usual. 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.

  • the analyst class is divided into industry groups - some groups have clearly more deal flow than others, 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 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.

  • moving is possible - lots of my colleagues moved after second year, but once again, it depends on the personality and lifestyle. Exit opps can be the same - some people leave to distressed debt hedge funds, some join PE firms, some start working in banking. 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.

  • some analysts are just superb, know modeling very well and have insight on credit in addition to business side knowledge. Powerpoint skills in banking are definitely better.

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 day for a 30% bump in salary. Exit opps are more limited, but not scarce at all given you get involved work on live deals and learn modeling. In 6 months, I have worked on numerous deals but closed only 3:

  • a 1.5 Bn revolver for a Tech company
  • a 170MM Term Loan for a Media Company along with a 25MM RCF
  • a Convert and bond issue for a tech company (structured the deal including covenants and covenant levels)

In addition, I worked on several LBO's and 3 M&A deals, some are still in the works. So, as I mentioned it's a good starting position, but essentially if one is ambitious - banking would be the next step. The biggest advantage of working in Credit Risk when starting out is improvement in work-life balance over business side counterparts. Let me know if it helps.

 
Mar 9, 2011 - 5:22pm

Nice insight! Sounds actually as one of the most underrated positions to be in...quite comparable prob. to the classical IBD stint, just that you guys do not have to do boring pitching crap and go home at reasonable hours. How much client interaction do you have? Would you say that your department is well respected by the corp. financiers?

 
Mar 9, 2011 - 8:51pm

according to illinoisprogrammer, risk management is the best job in the world. didn't u know BO > FO?

oh yes u get to have work life balance and i heard #1 risk guy in the world makes more than the avg ibd analyst! this alone means risk > all. risk is sometimes compared to jobs such as HF manager, president of united states, emperor of byzantine rome, and space shuttle astronaut guy.

take risk and never look back. KKR turned down my app yesterday for a risk guy. sure showed me

i'm trying to lateral to risk now from my other megafund job cuz regardless of what i just said, risk > megafund jobs.

CLIENT INTERACTION you ask?!?! trust me ur flying out to clients on 1st class jets made out of steak and caviar. how does it fly? WHO CARES UR IN RISK, best job in the world?

RESPECT BY FINANCIERS? COME ON! when risk guys walk in, we stop the rotating doors and roll out the red carpet. then everyone bows and ur only allowed to get back up once the risk guys pass at least 30 feet away from you.

heck, just ask illinoisprogrammer. its the sickest job EVER!

 
Mar 9, 2011 - 9:04pm

boutiquebank4life:
according to illinoisprogrammer, risk management is the best job in the world. didn't u know BO > FO?

oh yes u get to have work life balance and i heard #1 risk guy in the world makes more than the avg ibd analyst! this alone means risk > all. risk is sometimes compared to jobs such as HF manager, president of united states, emperor of byzantine rome, and space shuttle astronaut guy.

take risk and never look back. KKR turned down my app yesterday for a risk guy. sure showed me

i'm trying to lateral to risk now from my other megafund job cuz regardless of what i just said, risk > megafund jobs.

CLIENT INTERACTION you ask?!?! trust me ur flying out to clients on 1st class jets made out of steak and caviar. how does it fly? WHO CARES UR IN RISK, best job in the world?

RESPECT BY FINANCIERS? COME ON! when risk guys walk in, we stop the rotating doors and roll out the red carpet. then everyone bows and ur only allowed to get back up once the risk guys pass at least 30 feet away from you.

heck, just ask illinoisprogrammer. its the sickest job EVER!

Wow. Just wow. You're a huge douche.

-MBP
 
Mar 9, 2011 - 9:31pm

manbearpig:
boutiquebank4life:
according to illinoisprogrammer, risk management is the best job in the world. didn't u know BO > FO?

oh yes u get to have work life balance and i heard #1 risk guy in the world makes more than the avg ibd analyst! this alone means risk > all. risk is sometimes compared to jobs such as HF manager, president of united states, emperor of byzantine rome, and space shuttle astronaut guy.

take risk and never look back. KKR turned down my app yesterday for a risk guy. sure showed me

i'm trying to lateral to risk now from my other megafund job cuz regardless of what i just said, risk > megafund jobs.

CLIENT INTERACTION you ask?!?! trust me ur flying out to clients on 1st class jets made out of steak and caviar. how does it fly? WHO CARES UR IN RISK, best job in the world?

RESPECT BY FINANCIERS? COME ON! when risk guys walk in, we stop the rotating doors and roll out the red carpet. then everyone bows and ur only allowed to get back up once the risk guys pass at least 30 feet away from you.

heck, just ask illinoisprogrammer. its the sickest job EVER!

Wow. Just wow. You're a huge douche.

Seconded.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 
Mar 10, 2011 - 2:40pm

boutiquebank4life:
according to illinoisprogrammer, risk management is the best job in the world. didn't u know BO > FO?

oh yes u get to have work life balance and i heard #1 risk guy in the world makes more than the avg ibd analyst! this alone means risk > all. risk is sometimes compared to jobs such as HF manager, president of united states, emperor of byzantine rome, and space shuttle astronaut guy.

take risk and never look back. KKR turned down my app yesterday for a risk guy. sure showed me

i'm trying to lateral to risk now from my other megafund job cuz regardless of what i just said, risk > megafund jobs.

CLIENT INTERACTION you ask?!?! trust me ur flying out to clients on 1st class jets made out of steak and caviar. how does it fly? WHO CARES UR IN RISK, best job in the world?

RESPECT BY FINANCIERS? COME ON! when risk guys walk in, we stop the rotating doors and roll out the red carpet. then everyone bows and ur only allowed to get back up once the risk guys pass at least 30 feet away from you.

heck, just ask illinoisprogrammer. its the sickest job EVER!

You add absolutely nothing to this site... I am sure you are a troll, but if not, then damn, you just suck as a human being.

 
Mar 10, 2011 - 1:43pm

Chipmunck/ Manbearpig and Oreos,

Thank you. It is unfortunate that some people have to make others feel bad to feel good about themselves. Now back to the questions:

  • Client interaction: only on senior level (VP and up, occasionally associate) - banking invites risk to the meetings with potential clients to make the bank comfortable with our commitment
  • Respect: not sure if I can speak to that being an analyst ( I work hand in hand with IBD analysts and it works well - when we work on spreading numbers, modeling or memos we always work together and have the same deadline. There are Risk groups in the bank that are more powerful than others - remedial management that sells disstressed assets is one. I wouldn't mind joining that group as an associate since you get massive valuation experience.

Overall here are my thoughts on Credit Risk:

Pros:
- you work on a lot of deals that actually CLOSE ( since others (banking) will do massive pitching)
- you will get your hands on different models (LBO/ M&A/DCF etc) when in banking groups model type can be limited to a certain group
- the hours are lighter but not THAT lighter

Cons:
- prestige- people know how hard the life of a banking analyst is
- pay (bonus) in banking is 30% more as an analyst and associate- base is the same
- exit opps are better in banking if you worked on deals that closed

Overall, your resume and experience is what you make out of it. I work on a lot of leveraged names where modeling and thorough analysis of the cap structure is essential. If others have different experience, I'd love to hear it.

 
Mar 10, 2011 - 2:18pm

Pretty good summary I guess..just depends on what you want! I guess some people here just have to be very big nerds..i'll probably start hating myself at some point for working inzane hours only for some little extra money and the prestige..exit opps is a legit reason, but ok, I'l see if it's gonna be worth it.

 
Mar 11, 2011 - 12:44pm

My very good friend is currently a 2nd/3rd year BB risk analyst and he wants out. Now, my view of risk is somewhat skewed in that all he talks about is moving to FO, so the following are thoughts from someone who is not satisfied with risk.

He's gotten into a few M7 MBA programs this fall and is planning to make a FO jump from there, so it is entirely likely for someone in risk to get into a top MBA program. He says that the bankers (corporate bankers that he works with) don't respect his group at all (his experience talking to CB analysts - they view risk as a "roadblock" to business most of the time, and that risk is just one of those internal roadblocks to go through for business to close), and a lot of the second/third years were lateral hires from other parts of the bank (like BO/MO) because the higher ranked risk analysts have left for FO positions outside the bank. He rarely works with IB, mainly the CB. I think he mentioned that his boss (the portfolio manager) complains every day about the job and how little respect he gets from bankers.

The job has excellent work life balance, and his modeling outside of cash flow projections are limited (there is no, for example, accretion/dilution analysis for revolving credit facilities - that's not likely). Movement to the CB is an option (dealing with loan products), but it will be more difficult to move to IB (M&A and equity).

As for client interaction, there is a little but it's not nearly to the level that bankers are trained to do. Those that he did attend as a risk person, they don't do any pitching or selling of the bank, just asking some due diligence type questions about capex spend or the business to help with the credit memos.

His biggest gripe about risk is that there is so much systems type BS that should be taken care of in India or some BO location, but ends up that his group takes care of a lot of it. There are monthly things that need to be updated or data checking type work.

For someone who is happy with a "lifer" type role, then it appears risk is more than fine, and eventually the goal is to make it to portfolio manager. The pay is decent (severely tapers at VP level) and the hours are very good (compared to IB). But as I mentioned, my friend has a strong itch to "make it" to FO as there is more optionality from there.

 
Mar 11, 2011 - 1:45pm

I completely agree with some of the points "electriclighto" has mentioned:
- compensation tapers off at VP level
- risk analysts realize that FO has much more appeal for their future careers
- client interaction is limited to due diligence sessions

At the same time the type of work depends on the culture of the group:
- my risk group has historically been a part of the Corporate Bank
- part of the mundane tasks (regular reviews and systems) are outsourced to India and upstate NY, so that analysts can focus on transaction and leveraged credits
- we work with both IBD and CB since transactions can include either
- as far as respect goes, I have never been yelled at by either bankers or risk MD, and definitely not analysts. Risk MDs I guess get respect based on the group they work at: there is a big difference between recovery management MD (asset sales) and an MD in a regional office.

But overall, most of ambitious risk analysts leave to FO as a 3rd year (having to repeat 1 more year) or go on to B-school. I think this thread will help some people to decide on a career choice, thanks for contributing.

 
Dec 27, 2013 - 10:22pm

Risk Management - IBD position this fall (Originally Posted: 11/05/2008)

I wanted to get an ibd position this fall but after the superday I always got the "thanks but markets are just so tough" phone call and now I'm basically done with all of my interviews and all I have is a risk management offer from a bulge bracket. I guess I don't have a lot of choice except maybe to apply to grad school but is risk a good place to start? It seems like the work you do is substantive and meaningful and you regularly engage with finance topics so the experience seems like it'd be decent. Will it be experience that will hurt me later trying to get into a good b-school or if i transition to banking/buy-side later? Also any idea what compensation is like? It's 60k base but I'm guessing bonuses aren't quite ibd level?

 
Dec 27, 2013 - 10:24pm

Risk Management - What they do in an IB? (Originally Posted: 01/13/2009)

Anyone knows what exactly Risk Management/ Risk Analyst do in an investment bank? (Such as its typical role, a typical day, level of salary, workload, differences and relationships between a banker (or trader) and a risk analyst, etc). I saw some material online talking about it but few are specific. Appreciate any input. Thanks!

 
Dec 27, 2013 - 10:25pm

in the current market environment, it can be hectic. essentially they will be working to conduct full reviews of counterparties and assessing their credit-worthiness, and using this information to resize trading lines, tenors, exposure, etc. ... they're continually monitoring exposure, overlimits, credit events, NAVs, and the like.

the hours can be long, but usually not as bad as IBD. i've gotten e-mails from credit guys at 1 or 2 in the morning, so i know for a fact that, at least on occasion, they will work that late.

sorry if this is somewhat incomplete. i'm not a credit analyst.

 
Dec 27, 2013 - 10:29pm

At banks you're going to see two main areas of risk: market risk and credit risk. Most of the posts above go into credit risk. Sales people on desks like commodities, with work almost exclusively with OTC derivatives and custom and/or structured products, will work a lot with credit risk personnel to get approval prior to executing chunky trades, for example. All focused on counterparty credit risk, which covers analysis of the trade itself, as well as analysis of the counterparty.

Market risk is also a big function, and from what I've seen you often have some market risk people with you on the trading floor. In a field like commodities where you are constantly introducing new products to get to clients, market risk has just as much interaction with traders, salespeople, and structurers as credit risk. Not to simplify it too much, but the market risk guys will monitor each desk's daily risk, work to get an overall risk picture across the entire firm, and work on approving new products that traders and salespeople want to introduce (how big the latter is depends on which desk you're talking about).

Overall, both areas are very quantitative--probably more so than most of what you'll see in trading. All the market risk people I knew were PhDs, but I don't think that's necessarily the case with all the credit risk people. Some credit risk functions are very fundamental (i.e. analyzing default risk of counterparties), whereas others are very quant (i.e. analyzing potential exposure of trades).

Either way, Risk Management is similar to the Quants on each desk, in that both of these functions typically require a higher level of education than in S&T (i.e. mostly PhDs vs. mostly Master's), yet have historically made less money and been considered less-prestigious than the front office functions. They still make great money, but quants and risk managers have never pulled in multiple millions in a year at any but the highest levels....

I personally think the credit crunch will correct this. I mean, I may be a smart kid, but is there any reason that as a new MBA (even from a top 3 school) with no finance experience, I can join a desk as a new salesperson, trader, or structurer, and makes more money than a newly-minted PhD from MIT or Stanford in some crazy field like Theoretical Physics or some shit like that?!?!? Of course not, but that's what happened.....It's absurd, and I think the financial crisis will likely correct that....i.e. the spread between risk management comp and front-office comp will come in significantly....

 
Dec 27, 2013 - 10:30pm

Thank you very much for your inputs! They're really helpful. I'm an undergrad and recently got an email from a BB asking if I'm interested in their Risk Analyst FT position (I applied for their IBD FT and they said the position is closed when I submitted the application...). I will be getting a call from the HR people next week. Hope I could get a much better idea what the job is all about after that.

 
Dec 27, 2013 - 10:31pm

Citi's Sales & Trading VS. DB's Risk Management (Originally Posted: 03/03/2009)

I have recently been offered a sales & trading internship this summer at Citi, as well as a risk management internship at DB, both in NYC. The situation right now is that I have verbally committed to Citi, but I am very split 50/50 on the firms. I know that if both firms were in the same financial shape, I would take Citi in a heartbeat, but with the imminent threat of nationalization, everything about Citi is up in the air. I know for a fact that the return offer for FT will be much higher, and I like the people at DB just a little bit more than at Citi (although I still like people at Citi). The risk management internship has many subgroups in which the MD in those subgroups pick you for their subgroup for the summer. These subgroups include, compliance, money laundering, market risk, credit risk, and hedge fund credit risk... keep in mind though that I do not get to choose, the MD's do. I think the hedge fund credit risk would be worth it, since you get to look at hedge funds' books and portfolios and strategies etc... but I'm not guaranteed to be in it. On the other hand, Citi is known for having great internship programs, I feel like I will come out of the internship at the end of the summer with more experience than if I went to DB, although the return offer for FT i probably not as likely as at DB.

 
Dec 27, 2013 - 10:32pm

I think....

It depends on your risk/reward tolerance. Since you're in the trader's train section, why don't you go with Citi s&t and see what you learn. You're still young (undergrad right?) if you screw up your career path there's always the MBA.

(If you're an {MBA/gradstudent/much older} I would go with DB though!)

 
Dec 27, 2013 - 10:34pm

completely agree.

  1. Citi - front office - value added activities
  2. DB - middle office - risk in getting placed into shitty group/less value added

exit opps are better at citi no matter how you look at it. worst case scenario, citi fails no ft offer. or you don't get the ft offer regardless. you have the experience on your resume, and are now marketable for a similar career elsewhere. you take citi s&t now and want to go into db risk management, higher change that you'll get an interview and maybe even offer.

 
Dec 27, 2013 - 10:41pm

IBD Risk Management to PE (Originally Posted: 03/05/2010)

I will be doing two years of risk management (credit risk) at a BB and want to know how hard it would be to get into PE with this type of background? Just to give some additional details, I am graduating from a top 10 B-school at the very top of my class (GPA: 3.97).

If getting into PE from a risk management position is too difficult, what are some typical exit ops available for RM analysts.

Any insight would be helpful. Thanks!

 
Dec 27, 2013 - 10:47pm

Not sure I understand the point of the responses above. You guys are Wall Street professionals and you can't just answer or ignore the guy's question? To the OP, if you think PE is your path then why go to RM? There are possibilities coming from any path, but PE as a whole is an industry comfortable with its cookie-cutter process for hiring junior professionals. What that means is if you're not a typical IBD analyst, you're going to have a lot of trouble when they get to asking you about deals/dynamics/drivers/etc. There is only so much you can pick up in a book, and much of what is useful in such interviews comes from being in the meetings as negotiations get done. Good schools and GPAs are helpful, but they have more to do with checking the box than actually moving you forward. Your goal is to be successful in the interview, not just get there, and that'll likely take deal experience. Going to RM puts you at a disadvantage right away. If PE is truly your goal a year from now, a move from RM to an analyst role may be your best best. Might sound painful now, but it's a relatively short addition in the longer-term scheme.

 
Dec 27, 2013 - 10:49pm

I'm just not one to ever tell someone they can't do something. When I first looked at PE a few years ago, everyone told me about the typical path and how it was hard to go outside of that. When I then asked about their backgrounds, they were always the exception. That said, those exceptions happen more often at the senior ranks, when you bring operational experience or something else to the table. Anyway, just my two cents. Good luck!

 
Dec 27, 2013 - 10:50pm

I am in an exact same position as you are. Maybe we will even end up working at the same bank. I have heard that it is hard but doable, especially if you have good networking skills (I think, b-school wouldn't mean anything once you get the job - I am from an excellent b-school as well). Once you get the job, it's your job that will stand out on the resume...or not. There is also plenty of RM jobs in PE, have you thought about that?

If not, a more advanced degree, eg CFA or MBA might be another opportunity.

When are you starting?

 
Dec 27, 2013 - 10:52pm

As others have said, it's a possibility but it's extremely difficult., unless you're going to a small shop or start up shop. You might be able to do portfolio management/risk or something along those lines, but I would not count on sitting on the deal origination side.
You mentioned that you never liked IBD because of the lifestyle. What makes you think that you will like the PE? A lot of IBD analysts want to go into IBD and aren't afraid of working 100 hr weeks. They've 'paid their dues' so to speak by the time the PE gig comes along and if nothing else, PE shops recognize that.

 
Dec 27, 2013 - 10:53pm

HerSerendipity is exactly right. It will be possible but difficult at a small or startup shop. it will be extremely difficult at a MM and almost impossible at a large-cap (assuming we're talking about traditional FO associate role). you will be better off doing something else after RM and then try to move into PE. the bottom line is, you've been working 75 hrs per week in a relatively less stressful job, and you'll be competing against others who have worked 100+ hours per week doing the type of work that's more directly related, of course you'll be at a significant disadvantage during PE recruiting.

Absolutely agree that if you would choose (and I infer from your writing that you had the choice to go into banking but did RM instead at your own volition) to do RM due to fear of hours, stress, lifestyle and etc., you will most likely hate PE as well.

 
Dec 27, 2013 - 10:54pm

Risk Management vs IB vs PWM (Originally Posted: 04/21/2010)

Risk Management (GS/JPM) New York
IB (C/DB) Regional
PWM (MS/CS/UBS) New York

Given that the person has a quant background and ultimately wants to get into trading, what would you choose?
IB seems to be the obvious choice but Risk is more 'quant' and might offer a chance to lateral into trading. PWM is also considered because it's within a products group (i.e. not a sales role) and very quant-based (dealing with asset allocation optimization etc.)

 
Dec 27, 2013 - 10:56pm

I think bottom line, it'll be easier to move from IB to trading. In fact, I know of people who have done this after getting an MBA or even quitting IB after a year. Are the skills directly transferable? I don't know. Excel spreadsheets, financial models, 10k statements... probably not. However, I think firms are more willing to interview you knowing that you had the willpower and academic background to get an IB job in the first place.

Risk management to trading is also feasible due to the "quant" nature of risk management, but it really depends on how you spin it and what kind of risk management experience you have. Risk management breaks down into operational, financial, counterparty, etc. and depending on what kind of experience you get, it might or might not be relevant to a role in trading.

PWM... I can't speak to since I don't know many people in PWM, and of the people I do know that are in PWM, I'm not sure if they're looking to get into trading.

 
Dec 27, 2013 - 10:57pm

is-t:
Risk Management (GS/JPM) New York
IB (C/DB) Regional
PWM (MS/CS/UBS) New York

Given that the person has a quant background and ultimately wants to get into trading, what would you choose?
IB seems to be the obvious choice but Risk is more 'quant' and might offer a chance to lateral into trading. PWM is also considered because it's within a products group (i.e. not a sales role) and very quant-based (dealing with asset allocation optimization etc.)

Is the Risk management position credit or market risk? If it's market risk, the skills are somewhat transferable to trading, and you might have a decent shot at landing a trading gig. If it's credit risk, that's more of a IBD role.

 
Dec 27, 2013 - 10:58pm

transferable skills or not.. FO > MO > BO. Risk is MO to BO. It's the "in thing" post crisis.. but it's sort of like the bank's anus.. doesn't generate any revenue so no one thinks much of it.

ambition is a state of permanent dissatisfaction with the present.
 
Dec 27, 2013 - 10:59pm

The thing is though at least then he'd possibly in contact with traders, and if they like him they might take him under his wing.

Are we talking about FT or SA?

Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard. -30 Rock
 
Dec 27, 2013 - 11:00pm

lol lol lol IBD all the way. Risk Management sounds exceptionally boring but even that is greater than PWM....

-------------------------------------------------------- "I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
 
Dec 27, 2013 - 11:08pm

Think expected value. How many traders can become wildly successful and bring home the serious bonuses? I would suspect that the failure rate among traders is probably 80% over a three year period. So while the outcome of tail event can be a lottery like payoff, I believe risk managers would most likely end up making more money than a trader, on average, in the long run. Maybe that is just the Black Swan talking though. All things considered though, I would take the chance to make it big, because if you fail you'll just end up doing what you would have done if you never tried trading in the first place.

 
Dec 27, 2013 - 11:09pm

Some people don't want the responsibility that comes with trading. I know a girl who actually wanted back office, because she didn't want the pressure of dealing with clients or making money. They are a massive minority, but they do exist.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 
Dec 27, 2013 - 11:13pm

A family member of mine started as a trader out of undergrad. When he was 25ish, I think, he started thinking about starting a family and transitioned to risk management at GS. He got his MBA while there.

A few years ago, he got married and had a kid. He's VP or risk at a market making firm now.

His risk profile changed and he wanted more time with family. That's it.

 
Dec 27, 2013 - 11:17pm

In general tghe answer is that you wouldn't even tho risk management can lead to a very good career and the top jobs can be quite lucrative with comparatively little stress. But most people prefer trading because of the more obvious upside.

In my experience risk management guys are either a) busted out former traders, or more commonly, b) high-end ops guys who kind of rose to the top of that job and ended up being promoted to risk which is at least somewhat market-related. Type A generally is such a broken man that he just doesnt give a shit but he's good because he can at least speak the trading lingo competently enuff to fool an investor into thinking he is diligent and type B is generally so respectful of/in awe of the traders that he cant effectively manage any of their risk. I prefer to work with type B.

 
Dec 27, 2013 - 11:20pm

Risk management product groups within IBD (Originally Posted: 08/18/2010)

Anyone familiar with these groups within ibd, they deal with currency, commodity, interest rare and credit hedging for transactions etc for corporates and govs, also sell fixed income derivative products as well as offer structured financing? so pretty much in between ibd and sales/structuring.

im interested to hear what is the difference in doing this in the emerging markets (europe) vs developed markets, in terms of business volume and money to be made (i guess they have more currency opportunities etc)? also possible exit opps?

cheers guys

 
Dec 27, 2013 - 11:26pm

I work in credit risk and I like it so far (just started). If I get offered a third year/ associate I'll most likely take it I would say. We work with banking on everything, do a lot of similar technical stuff like spreads and models (write credit memos instead of redoing powerpoints, though). If you do well in credit risk, it seems like moving to banking is easier than anywhere else in the firm, but I probably wouldn't.

portfolio management and business school are solid exit op possibilities.

I can't really compare the groups across firms. It would probably be safe to aim for the same firms as banking. Although, come to think of it, the firms that are the biggest players in the loan markets would probably see the most deal flow and deal size for credit risk. So, I'd say JP Morgan, Citi and BofA would be the best bets. But obviously GS and MS always look good on a resume.

 
Dec 27, 2013 - 11:31pm

Yeah, I think there is some confusion. Risk management and credit risk management are different things in my opinion and experience. Risk management is dealing with trades, exposure to big loses, black swan type work. Credit risk management is more on the lending side, focusing on defaulting or non performing loans. Not saying that it is shitty or a bad job, but the whole term exit opportunities really centers around FO IBD. A manager at Radio Shack might have exit opportunities to manage other stores, become a district manager or go back to school, but you wouldn't necessarily use that term in his situation.

 
Dec 27, 2013 - 11:34pm

BOA Global Risk Management Internship (Originally Posted: 01/24/2011)

Hi All,

I recently got an interview for Bank of America's Global Risk Management internship program. I am currently a junior and would like a FT offer in S&T and was wondering whether this BOA opportunity would help me achieve that goal. I'd really appreciate any insight.

Thanks

 
Dec 27, 2013 - 11:36pm

I interviewed for the FT position in October 2010. Not sure about the internship, but FT was rotational so I would suspect there are plenty of networking opportunities as you move through the groups. The work itself is definitely middle office, but having BOA on your resume can't hurt, especially with BOA FT recruiting. Like most things, you will be able to make the best of it if you put forth the effort.

 
Dec 27, 2013 - 11:38pm

Nothing technical...I think I blew it with the "Why Risk Management?" question though. Have a very specific and (somewhat) compelling answer ready. I was a liberal arts major though, so it may depend on your school/major as far as technical questions.

 
Dec 27, 2013 - 11:39pm

for "why risk management" try to demonstrate why your skills match to risk better than any other division..

for example I said in mine something like "i like trading but I have come to realize I do not think like a trader. I know still want to be around products and markets but in more of a role that suits me"

along that.

my technicals were writing out stats formulas, knowing swaps, the functions of risk and simple math

  • this was not with BofA, but another BB. And for FT not SA
 
Dec 27, 2013 - 11:40pm

Credit Risk Management or Boutique M&A (Originally Posted: 10/19/2011)

What do you guys think, Credit Risk Management at Bulge Bracket or a position at Boutique M&A firm?
Which has better options for progressing into FO positions at top banks?

 
Dec 27, 2013 - 11:42pm

I also agree that you have to go boutique m&a. However, a lot of "boutique m&a firms" do 90% capital raises because they aren't good enough to get actual deals. If you have access to the information, check out what the boutique has done in the past 1-2 years. Either way. the boutique is the better option just because its more relevant to where you want to end up. The only reason I mentioned the capital raises is because they are usually fairly unpleasant to work on and the hours at the boutique will probably be way worse.

Think about this analogy: if you want to go the NFL, would it be better to play basketball in Division 1 or football in Division 3?

 
Dec 27, 2013 - 11:44pm

Sophomore risk management to junior s&t. Is it possible? (Originally Posted: 05/04/2012)

I'm a sophomore at a non-target and will be doing risk management, specifically derivative risk management, at an Asset Management firm this summer. This is not the boring type (i.e. compliance, checking regulations, etc) and will be quantitative (programming, modeling, etc.). This was literally the only offer I got and was very glad I got it.

My main concern is that my experience will not help me get the interviews at the BBs or the MMs. How relevant is derivatives risk for s&t? Will I have a chance against a student who had a s&t internship sophomore year? Will the BO/MO stigma hurt my chances? I'm currently networking for next summer, reading a couple books on options pricing/trading, planning a trip to NY in the fall, and scouting out information sessions and career fairs at local target schools for next fall. Am I on the right path? Should I be doing more? All this worrying keeps me up at night and it's hard to sleep these days. Thanks in advance for the advice.

 
Dec 27, 2013 - 11:48pm

You're work experience is better than most sophomores by a significant margin.
The so called back office stigma really doesn't apply to a sophomore year internship. What you're doing certainly sounds better than pwm, which is technically FO.

I don't really understand the cause for concern.
If this legitimately keeping you up at night, I can't imagine what you'll be like once you actually start working.

 
Dec 27, 2013 - 11:51pm

Market Risk Management career? (Originally Posted: 06/05/2012)

Hello,
I am an undergrad at a non-target have been reading a few books about market risk management and I am really interested in this type of work and think that would be something I would want to get into, but I have some questions first.

1.) Is it easier to get a job in market risk management after undergrad compared to something like ER?

2.) I had read a few profile of some risk managers and it looks like all of them have degree's in mathematics or statistics, is this a problem if my degree is in finance and not math?

3.) Is a risk management job in AM be more or less competitive than a IB.

4.) In terms of exit opps, would moving from risk management to a buy side firm (HF , PE) likely?

 
Dec 27, 2013 - 11:53pm

I'm looking to get into market risk as well, but I'm coming from grad school. From what I understand many, if not most, of the people in BB market risk groups hold advanced degrees (think MA, MS, MFE, PHd), so to give some insight:

1) No. It's extremely technical and heavily dependent on advanced math/stats concepts. Doesn't mean it impossible though. If you see a position posted to your campus recruiting, apply to the position and go talk to a counselor about your interest. They may be able to help you further than just submitting your resume.

2) Not necessarily, but coming from a non-target makes it more difficult. As a mentioned above, it's very technical field. Look into professional exams geared towards risk, FRM for example.

3) Not really too sure, but I would say they're comparable, but in different ways.

4) At this point, risk management departments in the HF world is almost non-existent. The much larger funds have risk departments, but the smaller (~1bln and under) almost definitely do not -- the risk is managed by the PM(s)/and or analysts. I've been in the HF industry for the past 6yrs, so I can't really speak to the PE funds, but I would assume there would be even less presence of risk groups since the type of investing is so drastically different (bottom-up, value-driven).

 
Dec 27, 2013 - 11:55pm

(edit: After posting, I check the OP date and my response is >2 years too late; I'll leave my full reply anyway as it may help those looking at market risk)

On (2), a lot of market risks work revolves around value-at-risk or similar probability-based risk models.

My first thought was that you'd find it hard to get onto a market risk desk if you didn't have a math background.

Then I wandered over to our market risk desk to ask them about this before I shot my mouth off. Their comments:
- There is a bias towards math studies, but that's not a requirement for us
- There's a high ranking guy in our market risk team who is a lawyer by training and background
- They need quant-minded people, which is normally evidenced through math, stats or engineering background, but we also have other ways of testing that
- Around 80-90% of the team is math/stats/engineering background

I then chatted with another colleague who has a few friends in market risk at other banks. His observations:
- Most other banks do more modelling and valuation work than our market risk desk appears to do (probably a nature of the business lines my bank has)
- Those banks require math background (math/stats/engineering degree) and also usually requiring coding skills (coding used in the modelling)

I hope that helps.

If you want an interesting read that deals a lot with market risk, read "When Genius Failed" ie the story of Long Term Capital Management.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 
Dec 27, 2013 - 11:56pm

I know you say most are math/stat/engineering backgrounds.

Would masters in finance (quantitative) or economics (econometrics based) be desirable?
I'm saying because my BS will be Econ. Calc I/II some Calc III/Linear Algebra learned on the "go" and Econometrics.
That makes it so, best case is a MSF or MSEcon with quantitative twist as most Stats/Math wants Math/Stat backgrounds.

Would actuarial exams help at all? Maybe the basics P and FM?
Just trying to get a fit on how to best proceed as applying for grad school and stuff is coming up next year.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller. "Live fast, die hard. Leave a good looking body." - Navy SEAL
 
Dec 27, 2013 - 11:58pm

At my bank, while they like math/quant backgrounds for MRC, it's definitely not a requirmenet. In fact, a number of the analysts have just a general finance background. It's not like they expect a junior to walk in knowing what the VaR means/the impact of the greeks/how to build a stats model/etc (though basic knowledge is nice), they will definitely train you through all of that starting on a just a basic cash portfolio. The key is demonstrating that you're bright and eager to learn. It's the exact same concept as how art history majors from Cambridge can land investment banking jobs... Quant risk would be the one where a maths background could be helpful, but again, my ex-boss was from a general business background but now he's in quant.

Recruiting wise, it'll be easier to get into risk than IBD/S&T/ER albeit the competition is a little bit different. Don't even worry about any professional exams, would be nice if you're in CFA L1 but FRM is definitely not required at a junior level. Make the bank pay for it after you're hired.

Exit Ops: Moving to buyside in risk I think is doable (seen it happen). I've only seen credit risk ppl (from BBs with strong CRM teams) moving to buyside in FO roles. MRC I've seen quant risk people moving into trading.

 
Dec 27, 2013 - 11:59pm

BB risk management vs reputable boutique/MM IBD (Originally Posted: 02/17/2013)

I realize the brand name at the BB is big, but how far does that take you with exits like PE/VC and chances of getting into a good b school, as compared to IBD at a top boutique/MM in NYC?

 
Dec 28, 2013 - 12:04am

Credit Risk Management to IB (Originally Posted: 03/04/2013)

Has anyone actually made the jump from mid-office to front office? Really hope to get some help as I am hoping to make the jump ASAP. Been at a middle-market i-bank for ~1.5 years now and don't want to be pidgeonholed into a mid-office role. Haven't had many opportunities for interviews, but been talking with one investment shop about a role as an analyst underwriter, but pay at the firm is notoriously low. Anyone have advice on if it's worth making the jump?

 
Dec 28, 2013 - 12:07am

Going in to risk management? (Originally Posted: 08/19/2014)

Hi all.
So being at the end of my degree I'm of course looking to do my next step. I have always been very keen on equity research but have recently been doubting if that's where I wanna go.

Instead I have been looking in more to either risk management, credit risk analysis or fixed income analysis. I do not have much experience in these areas though, or that good knowledge about them and was wondering if some people here might be able to provide some more insight.

One of my doubts lies in that I don't have that much of a math background, although I have a high IQ and always found math easy. I do believe I could learn a lot in a short time (prior to start working that is), but it would probably have to be through Khan Academy or similar, which doesn't give me an official transcript for it. I have studied some econometrics and statistics though, otherwise my main focus has been finance / accounting.

Furthermore I have recently got a contact at a global firm that might be assist with relevant contacts in risk management, which of course made me think more about it.

So what I'm wondering is if all the combined knowledge at WSO might be able to give me some more insight.

  • How's the career possibilities?
  • Are you stuck at back-office if you start in risk?
  • What would be the most important skills?
  • And so on...
 
Dec 28, 2013 - 12:09am

I wouldn't be too worried about your math skills unless you are considering market risk. Credit and fixed income analysis aren't that intense. For credit, it depends on the bank how back-officey your role will be. At some firms, you are a part of the relationship/sales team (FO), at others its more of a MO role interacting with other internal areas, and at some its BO. Exit ops vary depending on the credits you cover, but IB, ER, AM, or even PE are on the table. Skills for credit are similar to IB - accounting, economics, financial analysis, detail-orientation, excel/ppt, etc.

 
Dec 28, 2013 - 12:10am

Internal Audit/Risk Management at BB - Am I stuck forever? (Originally Posted: 11/26/2014)

Hello all,

Recently got an offer in Internal Audit/Risk Management at BAML. The route is appealing in the sense that it would be cool to really see how the business works and really get an understanding of it but I feel that the career prospects from this role are so specific that people are typically pigeonholed in this type of role.

Is this true? If not, what kind of exits could one expect in a role like this? Also, what tends to be the "skinny" on Internal Auditing at BB's?

 
Dec 28, 2013 - 12:12am

If I want to do IB should I take a Risk Management Position this Summer? (Originally Posted: 12/04/2014)

I am a Sophomore and I got an offer to be in the modeling division of PNC's Risk Management internship and they gave me two weeks to respond. I really want to interview with MUFG, JP Morgan's Freshman/Sophomore Program, and PNC's C&IB program, who are all taking resumes from campus. They have not finished collecting resumes yet, so they are early in their recruitment process. I think I have a pretty good shot at getting both the JPM and PNC C&IB, but I don't want to turn down the Risk Management internship and be caught with nothing this summer because I am only a sophomore. So I suppose my big question is: What should I do? How difficult would it be to leverage this "Middle Office" position into a Wall Street IB internship next summer?

I go to Carnegie Mellon (Semi-Target) and have a 3.9 as an Economics and Statistics major if that makes any difference in your suggestions

Thanks in advance everyone! Despite just being a lurker (until now), I've gotten a lot of helpful advice on here!

 
Dec 28, 2013 - 12:14am

How to leverage a BB Risk Management SA to a Front Office Role? (Originally Posted: 04/25/2015)

Subject says it all. What are the best ways to maneuver a Risk Management Summer Analyst for full time recruiting. What Front Office positions are best to apply to. Obviously IB would be a waste of an application and time, but what are some ways to leverage this experience into a greater position after graduation? All comments, experiences, input welcome.

 
Dec 28, 2013 - 12:20am

How To: Risk Management to Front Office (Originally Posted: 04/28/2015)

doing Risk Management Summer Analyst program at a T15 BB in june. semi-target but with good prior experience. Please provide me with any advice on how to apply to front office positions for Full Time roles in the fall.

Should I apply for RM at the BBs, while applying for front office roles at boutiques and other smaller shops?

 
Dec 28, 2013 - 12:24am

Risk management at an IB (Originally Posted: 01/01/2016)

Hi guys,
I've been doing research on risk management positions and just have a few questions. Now, I know that FO roles are mainly filled by the 6 target universities. Is this the same for MO/BO roles such as risk? In terms of pay, how does a risk role compare to FO? Would a first class degree from an average uni and a masters at one of the 6 target universities put me in a good position for risk graduate schemes?

Thanks!

 
Dec 28, 2013 - 12:26am

IB Credit versus Market Risk Management (Originally Posted: 01/24/2016)

Hey there! I have been offered a summer internship at JPM in either credit risk or market risk, and they are letting me decide which I would rather do. I have spoken to both sides on what their job functions are, but I haven't had the chance to hear a more specific comparison on the jobs -- what kind of personality would be good for each job, what the hours are like, etc.

 
Dec 28, 2013 - 12:27am

From what I know (not an incredible amount on either), if you like faster pace, market activity, and /or programming type applications, market risk may be for you. If you prefer a slower pace and are more analytical, credit risk may be for you. Credit would be more likely to lead to LevFin, while market would be more likely to lead to s&t. Please correct me if I am wrong.

 
Jul 7, 2017 - 2:23pm

Once the front office PowerPoint jockey's get automated, it will be up to risk management to make sure the algorithms dont run a muck. Also at my firm I moved from a "front office [strategist]" type role to RM and it was almost the same thing. That being said I do not work on Wall Street, so I am sure this varies drastically by location/institution as well.

 
Jul 7, 2017 - 2:24pm

Risk Management - Job description and experiences (Originally Posted: 06/03/2007)

Does anyone know anything about risk management positions within investment banks, and where I can find out more about them? Basics such as job description, salary, hours, pros/cons, etc. I'm most interested in roles that people move into after a 2-3 year analyst stint. I'm pretty sure that IB isn't for me long-term simply because of the hours/lifestyle, and I've heard that risk management is a decent compromise between lifestyle and money, with interesting work as well. Anyone in risk management?

 
Jul 7, 2017 - 2:27pm
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