Top Interview Questions For Risk Management You Should Know About
Risk management involves identifying, evaluating and prioritising risks for the purpose of reducing, monitoring, controlling or avoiding the adverse effects of a threat altogether. A financial risk management certification generally prepares you to deal with various kinds of risks faced by modern day organisations. Preparing to answer interview questions related to risk management is essential ito get hired by your future employers.
Any kind of loss, including data loss, sets companies back by thousands if not millions of dollars. It is essential for companies to employ talented people to help them identify, control, contain and avoid these risks. Thus, talented risk managers are in high demand.
Financial risk management courses can definitely help you increase your career prospects.
The growing need for risk management is fueling the high demand for financial managers as well. Based on estimates from the U. S. Bureau of Labor Statistics, the risk management sector has been predicted to grow by 6% by 2028. This is much faster than other sectors dealing with organisational management.
According to Recruiter.com, there is a 1.31% increase in the employment of risk management specialists every year. This fundamentally means that there will be more than 50,000 jobs opening up for risk management professionals by 2029.
Top Risk Management Interview Questions & Answers
How is a Risk Management system built from scratch?
Sample Answer: Before building a risk management system, the first task is to identify the most important processes inside the organisation and design a framework that is linked to the operation of all of these processes. The next step is defining risk assessment systems or tools and then inviting other people to collaborate. We must also then monitor the execution of the project and how it reacts to certain operations or tries to mitigate the losses. If the system is not satisfactory, we restructure the system by choosing alternate techniques such as SWOT or PESTLE analysis and other combinations of tools.
What qualities and skills do Risk Managers require?
Sample Answer: Risk managers must have problem-solving, strategic thinking and analytical risk assessment skills. They must also have a strong foundation in finance and possess knowledge about regulations. Risk managers must also be adaptive to varying financial or operational situations and should also be capable of working under high levels of stress.
What are the indicators of a solid risk report?
Sample Answer: A solid risk report consists of the assets that need to be protected and the various threats that the asset might face. The report must also cover the various controls that can mitigate the risk to a harmless level and mention how effective those controls are. Good risk reports also have details on how the risk management program performed while being monitored.
What are the tools that are used for assessing risk?
Sample Answer: Some tools used for assessing risks are Decision Trees, FMEA (Failure Modes and Effects Analysis), Risk Matrix and the Bowtie Model.
What is the purpose of risk management inside an organisation?
Sample Answer: The main purpose of risk management is to mitigate damages or losses. Companies or organisations can reduce the severity of risks or threats through early identification. Also, risk management allows companies to prepare backup plans to handle threats.
Is the risk tolerance and appetite defined by the company in order to manage its businesses?
Sample Answer: Yes, risk tolerance must be defined to engage in business. This is essential as the capacity to take on risks and the willingness to incur damages is different for each organisation. Thus, the risk appetite of the company must be first calculated in order to proceed with business operations.
Who is given the responsibility of risk management processes or for enterprise risk management?
Sample Answer: Generally, the project manager is responsible for managing all kinds of risks within the project, while senior managers are designated as ‘Risk Owners’ so that there is someone to take ownership of the risk. This is for the Risk Register, but as for the entire enterprise, all employees must take responsibility for managing risk in their own way.
Does risk management include individual performance plans?
Sample Answer: If risk management is crucial for the kind of business the organisation is involved with, the individual performance plans for employees of all organisational levels and designations must include protocols that help the organisation manage risk.
How are risks addressed by organisations?
Sample Answer: The first duty of an organisation is to avoid the risk altogether. This is known as Risk Avoidance. In case this fails, organisations can choose to reduce the risk by Risk Mitigation. However, if the risk cannot be mitigated or avoided, companies can choose to transfer the risk through Risk Transfer or contain the risk (through accepting the losses) by Risk Retention.
What made you decide to become a risk manager?
Answer: The ability to help organisations mitigate losses or completely avoid damages feels great to have. It is also a great way to give back to the organisation you are working for to indirectly protect all the employees and clients depending on the company at risk.
What are the qualities of effective risk managers?
Answer: Good risk managers must have analytical risk assessment skills, problem-solving skills, strategic thinking skills and strong financial foundations. Risk managers must also pay attention to detail and follow regulatory protocols to be truly effective
Have you helped in building any risk-management system? How?
Answer: Yes, I was involved in the development of a sample Integrated Risk Management System (IRMS). First, I identified the risk factors and then established the context and the various contingency plans. Then, I analysed the risk and implemented various risk management frameworks that go well with the risk policy of the dummy organisation. Finally, I monitored and reviewed the system to evaluate how it functions.
How did you overcome a substantial obstacle?
Answer: Anyone can overcome an obstacle by identifying the source of the problem,researching its adverse effects and how others try to handle similar problems. Then, once the root cause of the problem can be identified, we must articulate a method of either avoiding the obstacle entirely or beating the obstacle. This can be done through more research and experimentation in controlled environments or statistical simulations.
What are the qualities of an effective risk management program?
Answer: The qualities of an effective risk management program are their ability to be adaptive and have a good number of contingency plans. Also, analysing, fixing or managing risks should be easy and interactive for employees of all organisational levels. The program must also have good monitoring and collaboration features. Finally, the program must adhere to the risk policy of the organisation and be based on a suitable risk management framework for the organisation.
How can people be convinced to address risk management?
Answer: Organisations, employees or even common people can be informed about the kind of damages that are incurred by companies due to not addressing risk properly. You can show others how the risk could be controlled or avoided with just a proper risk management plan.
Risk managers have the responsibility of protecting the organisation from risks and keeping processes compliant. These skills and knowledge must be gained through industry-accepted methodologies and well-planned lessons as risk management is a very sensitive domain.
Hero Vired has an excellent integrated risk management program for budding finance professionals who wish to work in this sector. The program covers accounting, regulations, risk management and many other tools such as Excel and VBA (Visual Basic for Applications). For more details, check Hero Vired’s Certificate Program in Financial Analysis, Valuation & Risk Management.