2. Risk Analysis
• Financial risk comes with the use of leverage it occurs
when a company has a heavy reliance on debt as a
funding source
• Liquidity becomes a much bigger concern for a
management team that borrows, as principal and
interest payments must be made to service its debt
obligations. A company that uses debt in its capital
structure becomes susceptible to rising interest rates
and is required to adhere to the terms of its various
credit agreements
• Risk Transfer
• Reinsurance
3. Business Risk
Business risk, on the other hand, is about
internal and external forces that converge to
create threats to a company and its
management team
The external business environment, including
macroeconomic forces well outside the
control of management (like inflation,
foreign exchange rates, or prevailing interest
rates)
Industry-specific risks, like the level of
concentration in the industry, regulatory risk,
barriers to entry, the threat of disruption, and
other factors
Company or firm-level concerns, like
ineffective management, reputational risk, a
toxic corporate culture, and customer or
supplier concentration risk
4. Economy, Business Environment, and Industry
PESTEL Analysis: Stands for Political, Economic, Social, Technological, Environmental, and Legal. The
framework seeks to understand factors in each of these 6 buckets that may create opportunities or risks for a
business.
Porter’s 5 Forces: An analysis tool that helps conceptualize the attractiveness of a particular industry,
measured against factors like barriers to entry, customer and supplier bargaining power, and the threat of
substitute products or services
SWOT Analysis – SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and
weaknesses are characteristics of a business that put it at a relative advantage or disadvantage (respectively)
over its competitors. Opportunities and threats are elements in the external environment that may present
areas for growth or significant risk to a specific firm
5. Financial Analysis & Risk Factors
• Top line
• Bottom line
• Debt Maturity Schedule
• Market Forecast
• Contractual Obligations and others
• Market Forecast
Risk Factors?
6. Skills and Career Prospects
• Manipulating and interpreting risk-related data using risk information management software (RIMS)
• Quantifying the potential negative effects of risk-related activities
• Identifying practices within the organization that contribute to increased financial risk
• Compiling reports, summaries, and presentations to communicate findings to key stakeholders within the business
• According to a 2019 CFA Institute compensation study of charterholders and members, financial risk analysts and managers
reported a typical, global total compensation of US$129,000 (US$105,000 base salary)
• Credit Risk
• Transaction Fraud Risk
• Liquidity Risk
• Tradeable Risk
• Interest Rate Risk
• Market & Price Risk
• Data analysis
• Industry and company analysis
• Financial analysis
• Financial modeling
• Valuation
• Economist
• Investment strategist
• Financial analysts
• Securities analysts
