Why Financial Risk Management is a Critical Business Function Today
Fact: Risk is a four-letter word that cannot be wished away. Consider the recent demise of two mid-sized banks in the U.S. (Silicon Valley Bank and Signature Bank of New York) and the sliding confidence in one of Europe’s top banks, Credit Suisse. If nothing else, these events underscore the growing importance of hiring professionals with a solid grasp of managing financial risk. Therefore, upgrading your knowledge through a financial risk management course in this constantly shifting economy will help you and your organization and ensure your continuing relevance to the team.
After all, companies are paying heed to this need and fortifying themselves with the necessary tools. An Allied Market Research report indicated that the global financial risk management software industry was worth $2.5 billion in 2021 and is anticipated to touch $9.2 billion by 2031. This translates to a CAGR of 14.4% from 2022 to 2031. Hence, honing your skills by signing up for a financial risk management course is becoming essential for your career growth and success.
What is Financial Risk Management, and What are its Different Types?
Financial risk management identifies, analyzes, and manages the current and potential risks to an organization’s financial performance. Simply put, it entails:
- Firstly, identifying the risk
- Then, measuring it
- After that, evaluating possible solutions
- Subsequently, creating a strategy to overcome the risk
- Finally, implementing the strategy to minimize any damage from the risk
Understanding financial risk in more specific terms helps to learn the different types a company can face. Briefly, these include:
- Market risk arises from the volatility in the financial markets or the movements in factors that affect prices.
- Credit risk: This emerges from the possibility of non-repayment of a loan by borrowers.
- Liquidity risk: Simply put, this is the risk that a company may not have the funds or resources to fulfill its current financial obligations.
- Operational risk: This is the risk of losses due to the organization’s failure of operations, processes, or policies.
- Legal risk: This risk is due to the looming threat of legal action against a company—this could be against its products, services, or any other aspect of its operations.
A financial risk management course can help you understand these risks better since these are complex and critical subjects. Moreover, this knowledge is essential for professionals in the finance function or even in a general management or leadership role.
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What is the Importance of Financial Risk Management?
Unexpected challenges, threats, and uncertainties mark the global business environment. In fact, according to Accenture’s 2021 Global Risk Management Study, 77% of risk leaders believed that “complex, interconnected risks are emerging at a more rapid pace than ever before.” The same study pegged the rise in the importance of financial risks on business agendas at 29%. This was the highest, along with operational risks.
Therefore, financial risk management is critical for any organization in such an ongoing scenario. It allows organizations to assess and prepare for potential financial risks affecting their business. Additionally, the financial risk management process involves research, as discussed earlier. This points to precarious areas; companies can decide how to prepare. In other words, do they still want to take the risk, or would they prefer to stay clear of that situation altogether?
To conclude, businesses need to build financial resilience against the inevitable risks. Further, they can also determine their risk appetite to succeed in an uncertain environment. That is why a sound financial risk management strategy is of immense importance.
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Key Skills Needed for Financial Risk Management
This may seem counter-intuitive, but one of the most critical skills for risk managers is the ability to communicate effectively. This is because they need to be able to convey the complexities of the risk assessment to concerned departments way. Here are some of the key skills required for this career:
- Analytical and research abilities to study the trends based on data and identify the potential risks
- Understanding regulatory frameworks is a crucial threat component for any business
- Communication skills to convey their findings and strategy to others
- In-depth financial knowledge since that is a core skill to be competent in this function
- Technological skills to track how technology is changing the way business is conducted; additionally, to stay equipped to utilize the risk management software available effectively
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How Can Emeritus’ Financial Risk Management Course Help Finance Professionals?
One of the most efficient ways to develop the skills listed above and more is to sign up for a financial risk management course. This learning path will help finance professionals acquire specialized knowledge and in-demand skills in financial risk management. Additionally, choosing to undertake this course with Emeritus will allow professionals to learn updated skills and stay plugged into up-to-date trends in this field.
In summary, the value of the finance courses on Emeritus emerges from the following factors:
- They are created in collaboration with the best universities and faculty around the world
- Further, they are tailored for people across age groups, requirements, and experience
- Additionally, they are designed keeping key learning outcomes in mind. Therefore, they are unique, interactive learning experiences and include assessments, hands-on activities, and skill applications
- Moreover, the courses can help learners tackle present challenges in the industry while preparing them for future trends and risks
- Importantly, these courses meet the standards set by Quality Matters, a global organization that provides quality standards for online and innovative digital teaching and learning environments. The rigorous criteria ensure that all learners invest in quality education
For any finance professional looking for growth in their career, a financial risk management course or any related program on the Emeritus platform is a step in the right direction. Start by exploring the gamut of finance courses and make the right choice for yourself.
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