Financial Analysis (FA) is a process of evaluating the internal finances of a company, i.e. expenditures, and then on external factors like profits and losses, other businesses and competitions, overall report of ongoing projects, budgets, and other finance-related transactions to determine the company’s current performance and future suitability. An educated strategy is then made on behalf of these observations which immensely help the company in maintaining a clear goal in regards to its finances.
Risk Management, a part of Financial Analysis, is a system that deals with the analysis of the overall market and the competitors of your particular company. Appropriate upskilling and learning in these concepts will make you future-ready for their job market in India. There is high demand for these roles currently.
Such specialists are an asset for any company, as they help in visualizing raw data and giving the big picture in relation to the company’s finances. Such comprehensible reports then help the management to make decisions backed by data.
These techiniques help a business to visualize its data clearly and make sense of the financial performance, health, and risk of the orgainzation.
What is financial analysis?
Financial analysis is doing a thorough report on a company’s finances, both internal and external. There are seven types of financial analysis.
Vertical financial analysis is measuring one base metric in relationship to other various metric on a financial statement. It helps in recognizing changes over time.
Horizontal analysis, also known as trend analysis, is helpful in spotting trends over time. It is essentially an evaluation of how financial statement figures change from one year to the next.
Debt and liability are always a concern for any company. Liquidity analysis is done to see if a company is capable of paying its debts and other expenses.
The goal for every business is to be profitable and sustainable. Profitability analysis is done to evaluate a company's cost and revenue. It helps in forecasting the performance of a business over a certain period of time.
5. Scenario and Sensitivity
This is an analysis related to risk management. It is done to forecast situations of business turbulence and understand the potential plan of action in such circumstances to stablize the situation. This helps in predicting certain outcomes based on different variables.
Variance analysis is the evaluation of deviations from a company’s actual budget versus its forecasted or planned budget. For example, if a company’s planned sale budget was ₹10cr but the actual sale was only ₹7cr, then there will be a ₹3cr variance.
Valuation financial analysis is an analysis of your business's present value based on its revenues, growth potential, cash burn etc. It helps in gauging a company’s potential value and and is used as an indicator during raising funds, and mergers and acquisitions.
What is Risk Management?
What happens when a sudden legal crisis threatens the business stability? Or is faced with a sudden market crash?
To protect themselves from these unwanted and uncertain events, they use the process of risk management. This includes identifying risk, and assessing and controlling it to better recuperate the company afterwards.
The risk management process includes five key steps:
1. Identifying potential risks.
2. Analyzing the risk and measuring its severity.
3. Prioritizing the risk as the most important task at hand and finding alternative solutions.
4. Implementing possible solutions to treat the risk.
5. Monitoring the results.
What does each of them do?
As a person working in a financial risk management position, you would be required to analyze risks and the finances of the business.
What is the demand for people with these skills?
Currently, there is a huge demand for these skills in India. It is considered one of the most lucrative careers with over 7,000 jobs available for the right candidates. After learning these skills and getting a financial risk management certification, you will get the chance to work for banks, insurance companies, stockbroking firms, and finance and leasing companies.
How does one gain these skills?
Financial risk management courses are a great way to upskill yourself and be job-ready. Course that help you get the foundational concepts right and provide hands-on learning and exposure should be the way to go.
Hero Vired’s Certificate Program in Financial Analysis, Valuation & Risk Management is an excellent program for anyone looking to uspkill and build a career in these exciting areas of finance. The program is offered in partnership with edX and from Columbia University. The course is extremely industry-oriented and provides live learning with leading industry-mentors and faculty.
The program also has a hands-on capstone project which will help you in gaining exposure to real world problem statements. This specialization course will give you the added edge over your competitors in any job role or interview.
What are the points to look for when picking an online course in these concepts?
You should look for a comprehensive guide, where leading industry experts are sharing hands-on practical business knowledge with you. The course also has to be time conscious, which means, it should have the syllabus made and divided in such a way that students get a lot done in a short period of time.
What are the benefits of gaining financial analysis and risk management skills?
You should definitely upskill in them as their need is booming in India. Businesses are increasingly becoming more data-driven and these skills help them visualize their finances and potential riskl.
For a fresher, the pay associated with roles in these areas is definitely higher. Long term careers in them leads to handsome remunertions. You can work as a Financial Risk Manager, Equity Research Analyst, Credit Risk Analyst, Senior Credit Risk Analyst, Risk Manager and more.
What is the scope of these skills?
There are numerous vacancies in this field. Companies are looking for the right employee and are willing to pay for the skills you are learning today.
An entry-level employee working as a Financial Analyst with less than a year’s experience can earn around INR 3 LPA to INR 5 LPA. Someone with upto 10 years expereince one can look at a salary between INR 10 LPA to INR 15 LPA.
Deep and thorough financial analysis will help in knowing your company’s internal operations as well as show a clear image of its financial condition, helping you identify its profitability and the surest way to generate wealth.
Regular financial analysis is like a health check-up for any company as it is helpful in making a comprehensive overview of everything finance-related, including tax, profits and losses, internal expenditures, market competition, risk analysis and therefore making a solid business strategy at the end.
There is a high demand for Financial Analysts, as the country is aiming to be a trillion-dollar economy soon and wants to attract a lot of global investments.
Top companies are looking for reliable and knowledgeable individuals to take care of their financial needs. You have to have a head that sees the big picture for a company in terms of its finances. Brush up on your basic concepts of Economics, and with thre right learning program, you will be absolutely job-ready.