What it takes to become a risk manager
Risk managers have been in demand within investment banks since the financial crisis, as an influx of new rules and more intrusive regulators have forced firms to staff up. But how do you become a risk manager? We talked to Ian Chow, a Hong Kong-based VP of Asia Pacific risk management for J.P. Morgan's corporate and investment bank.
How did you become a risk manager?
I studied in the US for my undergraduate degree in accounting and finance. I then got my CPA there, so I’m a trained accountant. But at J.P. Morgan, I only joined risk management about a year ago. Before that I used to work on the finance and business management side. So it was an internal move.
What kind of qualifications are needed to become a risk manager?
When people talk about risk management, they tend to think of credit risk or market risk. For these two areas, definitely you need to have relevant quantitative qualification and thorough understanding of the capital markets.
Does it mean you need to have a maths/science/engineering degree?
Absolutely. You need to be able to understand the exposure and its implication and it's helpful if you have the relevant education or background.
How about your role in product risk?
Compared to credit or market risk, which is more of a science, product risk is more of an art, so critical thinking is a must, because you have to constantly challenge the process, challenge the business, asking questions like “have you thought about this”, “have you thought about that”, “what’s the implication for certain regulatory changes”, etc. Before a new product is introduced, you need to ask what the implication could be.
You will also need a lot of soft skills. For example, you have to be very disciplined and principle orientated. You shouldn't be scared if you are the only voice in the room, because you are the person who is independent from the business, yet you have to constantly challenge the business to make sure they have got everything looked at before they put it into the market.
In fact, one of the most fundamental abilities is to understand fully the balance sheet, the income statement and other financial statements.
What is FRM (Financial Risk Management) qualification? Is it really helpful to someone who wants to become a risk manager?
It's a plus, but not a must. Just like MBA, which is always a plus, but is it a must? No.
It sounds like you prefer CPA to the FRM?
Qualifications like CPA and CFA are all financial-related. Given that we are a financial firm, having some fundamental knowledge on financial statements is surely always a plus, but again, it’s not a must.
Where do risk managers usually sit in a bank? Front, middle or back office?
It really depends on which part of risk management you are talking about. We’ve got risk managers looking at offices across front, middle and back. Taking my role for example: we are independent from the business, so my role is more like an advisory one to the business in terms of overall risk environment or risk profile. But definitely there are lots of risk managers sitting across the board.
What is the typical career path for a product risk manager like you?
When you start at the junior level perhaps you will be tasked to look at one particular product or a number of products within a location. For example, within the APAC region, we have several sub-regions as well as specific markets.
I guess you have to start off looking after some individual products first and then expand to more regional or sub-regional roles. After that you will be better equipped to assume a regional role in Asia Pacific, covering maybe more than one line of business.
But I should stress that our career paths are not limited within risk management. I myself am a pretty good example. When I first joined J.P. Morgan after obtaining an MBA from Chinese University of Hong Kong, I was part of the CFO team here in Asia, looking after investor services. It was from the finance and business management area that I moved to risk management. But I'm not alone. Our global platform offers a lot of opportunities and we’ve got lots of examples here moving from back to middle to front office, or the other way round.
So in terms of career path, I would say having more exposure from different functions within the business definitely helps you to go up a little bit quicker or higher, because you’ve got a better understanding of the business from different functions, so you’ve got a better visibility.
You previously stayed in the US for almost ten years. Why did you come back to HK?
As I mentioned, I did my undergraduate there, got my CPA there, and worked for a few years as well. It kind of fulfilled the goal as to why I was in the States. So I thought it was time to come back. At that time I got admitted by two MBA programs, one in the US, the other one is the Chinese University of Hong Kong. And I thought, well, we've just had a financial crisis; my roots are in HK; and in the next ten or 20 years, the world's growth engine will be shifting from the West to the East, so that’s why I decided to come back to HK, and joined the MBA program at CUHK.
Then you found a job in HK. Ever thought about moving back to the US?
I won’t close doors to future opportunities, because one of the very good things about J.P. Morgan is we’ve got a very good internal mobility program. I now work in HK, but moving across the region is not impossible.