After a 20-year career in risk management, with long stints in risk leadership roles at Morgan Stanley and hedge fund Eton Park, Viju Joseph made a strategic career move to fintech by joining Pefin, an AI financial advisory platform, as the president/CIO.
Joseph has a few things to say about risk management careers today.
"Risk-management teams on the sell side have dramatically increased in size, so a risk manager might end up doing a very small and less impactful role for a long period of time," he says.
Nor is jumping to the buy-side the answer.
"At smaller-to-mid-sized organizations on the buy side, everybody reports into the person who runs the hedge fund – the ultimate risk decision is taken by the portfolio manager or the chief investment officer," says Joseph.
There's no telling how much the PM or CIO values the risk-management function when you first start. Also, you might be on a small team with a lot on your plate.
In both kinds of firm, Joseph says there's a risk of headcount cuts. Some firms feel there's less market risk because of the bull market, and many believe they can get by with fewer risk managers due to automation.
"Are risk managers valuable only in bear markets or times of market volatility?" Joseph says. "When things are going well and volatility is low, buy-side firms feel they might not need as many experienced risk managers. But if a bear market arrives, they could suddenly scramble for the right risk professionals."
Meanwhile, AI, machine learning and other new technologies are changing the role of risk managers. Financial services firms increasingly use AI machine-learning and data-science techniques to understand the complexities of market risks.
"Over time, portfolio risk has gotten more complex and difficult to understand based on traditional primary risk factors," Joseph says. "As the markets have evolved, and the investment management space has become more crowded, the spectrum of risks that cannot be detected by the human mind has widened.
"Technology is a big support to the risk-management team," he says. "Data-science and machine-learning-based approaches are very helpful in augmenting and enabling risk teams to understand secondary and hidden sources of risk."
However, technology also has the potential to lead to job cuts on both the buy-side and sell-side, particularly in a world where risk headcount is so high.
If you want to survive the risk tsunami, Joseph suggests being "nimble" and cultivating a broad range of skills. He himself as moved to fintech by virtue of his long experience in finance.
That said, Joseph suggests this might not be possible for everyone: "If you are in risk, fintech is not the obvious career-switch step. I don't think any direct skills translate well.
"I went for a very interesting opportunity – I did not quit a risk career because of the issues in it," he says. "I would have still pursued this if everything was rosy in risk."
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