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The finance industry is concerned with how individuals and institutions handle their financial resources — how they raise their money, where they allocate it and how they use it — and assesses the risks involved in these activities as well as recommends ways to manage these risks.

There are a number of exciting and rewarding jobs in the field of finance. What follows are just a few examples.

The commercial banking sector employs more people than any other facet of the financial services industry. Banks offer individuals the opportunity to interact with a broad spectrum of people and the chance to develop a clientele. People in banking usually start out as tellers and shift to other bank services such as leasing, credit card banking, trade credit and international finance.

As the name indicates, a career in corporate finance means you will work in a corporation and are mainly concerned with sourcing money for the company — money that will be used to develop the business, make acquisitions and ensure the company’s future. In a corporation, you are likely to start as a financial officer.

As a financial planner, you may also work for a corporation but will mainly be concerned with only one aspect of finances — planning for the future. You have to have a firm grasp of investments, estate planning as well as taxes. Or you may serve as a consultant who provides financial planning for individuals, e.g., planning their retirement needs or how they can put their kids through college.

With annual revenues surpassing the trillion-dollar mark, the insurance industry looms as one of the most attractive areas for a career in finance. In 2005, there were an estimated 2.5 million people in the US who were employed in the insurance field, which is mainly considered with the business of managing risk and anticipating problem areas. Possible jobs in insurance include working as an underwriter, sales representative, customer service rep, asset manager or an actuary.

A career in investment banking means you will be concerned with issuing securing and helping investors buy, manage or trade financial assets. As a bonus, you get the chance to work on Wall Street in a leading investment banks such as Merrill Lynch, Salomon Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs.

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Risk Management is the process of measuring, or assessing risk and developing strategies to manage it. Strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Traditional risk management focuses on risks stemming from physical or legal causes.

Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. Regardless of the type of risk management, all large corporations have risk management teams and small groups and corporations practice informal, if not formal, risk management.

An ideal risk management starts with establishing the context, inclusive of the identity and objectives of stakeholders, the basis upon which risks will be evaluated and defining a framework for the process, and agenda for identification and analysis. The next step in the process is to identify potential risks—events that, when triggered, cause problems.

Hence, risk identification can start with the source of problems, or with the problem itself. Once identified, they must then be assessed as to their potential severity of loss and to the probability of occurrence. After which, a decision on the combination of methods to be used for each risk shall be made. Each risk management decision should be recorded and approved by the appropriate level of management.

In as much as no initial risk management plans will be perfect practice, experience, and actual loss results will necessitate changes in the plan and contribute information to allow possible different decisions to be made in dealing with the risks being faced. In the end, risk analysis results and management plans should be reviewed, evaluated, and updated periodically.

Risk management also faces difficulties in allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending while maximizing the reduction of the negative effects of risks.

If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are not likely to occur. Spending too much time assessing and managing unlikely risks can divert resources that could be used more profitably. Unlikely events do occur but if the risk is unlikely enough to occur it may be better to simply retain the risk and deal with the result if the loss does in fact occur.

Prioritizing too highly the risk management processes could keep an organization from ever completing a project or even getting started. This is especially true if other work is suspended until the risk management process is considered complete.

Risk management is simply a practice of systematically diagnosing, quantifying severity, selecting cost effective approaches for minimizing the effect of threat realization of the risks to the organization. All risks can never be fully avoided or mitigated simply because of financial and practical limitations. Therefore all organizations have to accept some level of residual risks.

Article Source: ArticleDashboard