Managing Risk in Financial Sector

Risk Management is a hot topic in the financial sector especially in the light of the recent losses of some multinational corporations e.g. collapses of Britain’s Barings Bank, WorldCom and also due to the incident of 9/11. Rapid changes in business condition, restructuring of organizations to cope with ever increasing competition, development of new products, … Continue reading “Managing Risk in Financial Sector”

Risk Management is a hot topic in the financial sector especially in the light of the recent losses of some multinational corporations e.g. collapses of Britain’s Barings Bank, WorldCom and also due to the incident of 9/11. Rapid changes in business condition, restructuring of organizations to cope with ever increasing competition, development of new products, emerging markets and increase in cross border transactions along with complexity of transactions has exposed Financial Institutions to new risks dimensions. Thus the concept of risk has captured a growing importance in modern financial society.

By facilitating transactions and making credit and other financial products available, the financial sector is a crucial building block for private as well as public sector development. In its broadest definition, it includes everything from banks, stock exchanges, and insurers, to credit unions, microfinance institutions and moneylenders. As an efficient service provider, the financial sector simultaneously fulfils an important function in the overall economy. Various types of Financial Institutions actively working in Financial Sectors include Banks, DFIs, Micro Finance Banks, Leasing Companies, Modarabas, Assets Management Company, Mutual Funds, etc.

Thus today’s operating environment demands systematic and more integrated risk management approach.


Risk by default has tow components; uncertainty and exposure. If both are not present, there is no risk. Definition of Risk as per Guidelines on Risk Management issued by State Bank of Pakistan is, “Financial risk in a banking organization is possibility that the outcome of an action or event could bring up adverse impacts. Such outcomes could either result in a direct loss of earnings / capital or may result in imposition of constraints on bank’s ability to meet its business objectives. Such constraints pose a risk as these could hinder a bank’s ability to conduct its ongoing business or to take benefit of opportunities to enhance its business.”

Types of Risks:

Risks are usually defined by the adverse impact on profitability of several distinct sources of uncertainty. More or less all financial institutions have to manage the following faces of risks:

1. Credit Risk

2. Market Risk

3. Liquidity Risk

4. Operational Risk

5. Country Risk

6. Legal Risks

7. Compliance Risk

8. Reputational Risk

Broadly speaking there are four risks as per Risk Management Guidelines which surround Financial Sector i.e. Credit Risk, Market Risk, Liquidity Risk and Operational Risk. These risk are elaborated here under:

i. Credit Risk

This is the risk incurred in case of a counter-party default. It arises from lending activities, investing activities and from buying and selling financial assets on behalf of others. This risk is associated with financing transactions i.e.:

a. Default in repayment by the borrower and

b. Default in obliging the commitment by another Financial Institution in case of syndicated arrangements.

It is the most critical risk in banking and one that must be managed carefully. It is also the risk that requires the most subjective judgment despite constant efforts to improve and quantify the credit decision process.

ii. Market Risk

Market risk is defined as the volatility of income or market value due to fluctuations in underlying market factors such as currency, interest rates, or credit spreads. For commercial banks, the market risk of the stable liquidity investment portfolio arises from mismatches between the risk profile of the assets and their funding. This risk involves interest rate risk in all of its components: equity risk, exchange risk and commodity risk.

iii. Liquidity Risk

The liquidity risk is defined as the risk of not being able to meet its commitments or not being able to unwind or offset a position by an organization in a timely fashion because it cannot liquidate assets at reasonable prices when required.

iv. Operational Risk

This risk results from inadequacies in the conception, organization, or implementation of procedures for recording any events concerning bank’s operations in the accounting system/information systems.

Need for Risk Management and Monitoring:

There are a number of reasons as to why there is so much emphasis given to Risk Management in Financial Sector now a day. Some of them are listed below: –

1. Present structure of joint stock companies, wherein owners are not the mangers, hence risks increase; therefore proper tools are required to achieve the desired results by covering the risks.

2. The financial sector has come out of simple deposit and lending function.

3. The world has become very complex so the financial transactions and instruments.

4. Increase in the number of cross border transactions which caries its own risks.

5. Emerging markets

6. Terrorism Remittances

Risk monitoring in financial sector is very crucial and an inevitable part of risk management. Risk Monitoring is important in the financial sector due to the following reasons:

1. Deals in others’ money

2. Direct stake of deposit holder.

3. Much riskier sector than trading and manufacturing.

4. Previous / Recent problems faced by banks i.e. stuck portfolio that is credit risk.

5. Bankruptcy of Barings Bank due to short selling / long position that is market risk.

6. Operational risk does not has immediate impact, but important for continuity and progress of organization.

7. Appetite of a financial institution to take risk is related with the capital base of the institute so it caries a huge risk of over exposure.

Components of Risk Management Frame Work

Risk Management Frame Work has five components. First of all risk is Identified, then it is Assessed to classify, seek solution and management, after assessing quick Response and implementation of solution and the last phase is Monitoring of the risk management progress and Learning from this experience that such problem never occur again. Whole process is to be well Communicated during the entire process of risk management if it is to be managed efficiently.

The International Organization for Standardization (ISO) has defined risk management as the identification, analysis, evaluation, treatment (control), monitoring, review and communication of risk. These activities can be applied in a systematic or ad hoc manner. The presumption is that systematic application of these activities will result in improved decision-making and, most likely, improved outcomes.

Structure of Risk Management

Depending upon the structure and operations of organization, financial risk management can be implemented in different ways. Risk management structure defines the different layers of an organization at which risk is identified and managed. Although there are different layers or level at which risk is managed but there are three layers which are common to all. i.e.

Risk Management

For managing risk there are certain basic principles which are to be followed by every organization:

1. Corporate level Policies

2. Risk management strategy

3. Well-defined policies and procedures by senior management

4. Dissemination, implementation and compliance of policies and procedures

5. Accountability of individuals heading various functions/ business lines

6. Independent Risk review function

7. Contingency plans

8. Tools to monitor risks

Institutions can reduce some risks simply by researching them. A bank can reduce its credit risk by getting to know its borrowers. A brokerage firm can reduce market risk by being knowledgeable about the markets it operates in.

Functionally, there are four aspects of financial risk management. Success depends upon

A. A positive corporate culture,

No one can manage risk if they are not prepared to take risk. While individual initiative is critical, it is the corporate culture which facilitates the process. A positive risk culture is one which promotes individual responsibility and is supportive of risk taking.

B. Actively observed policies and procedures

Used correctly, procedures are powerful tool of risk management. The purpose of policies and procedures is to empower people. They specify how people can accomplish what needs to be done. The success of policies and procedures depends critically upon a positive risk culture.

C. Effective use of technology

The primary role technology plays in risk management is risk assessment and communication. Technology is employed to quantify or otherwise summarize risks as they are being taken. It then communicates this information to decision makers, as appropriate.

D. Independence or risk management professionals

To get the desired outcome from risk management, risk managers must be independent of risk taking functions within the organization. Enron’s experience with risk management is instructive. The firm maintained a risk management function staffed with capable employees. Lines of reporting were reasonably independent in theory, but less so in practice.

Internal Controls

Para one on first page of the ‘Guidelines on Internal Controls’ issued by SBP provides:

“Internal Control refers to policies, plans and processes as affected by the Board of Directors and performed on continuous basis by the senior management and all levels of employees within the bank. These internal controls are used to provide reasonable assurance regarding the achievement of organizational objectives. The system of internal controls includes financial, operational and compliance controls.”

The current official definition of internal control was developed by the Committee of Sponsoring Organization (COSO) of the Treadway Commission. In its influential report, Internal Control – Integrated Framework, the Commission defines internal control as follows:

“Internal control is a process, effected by an entity’s Board of Directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

 Effectiveness and efficiency of operations.

 Reliability of financial reporting.

 Compliance with applicable laws and regulations.

This definition reflects certain fundamental concepts:

 Internal control is a process. It is a means to an end, not an end in itself.

 Internal control is effected by people. It is not policy manuals and forms, but people at every level of an organization.

 Internal control can be expected to provide only reasonable assurance, not absolute assurance, to an entity’s management and board.

Internal control should assist and never impede management and staff from achieving their objectives. Control must be taken seriously. A well-designed system of internal control is worse than worthless unless it is complied with, since the assemblance of control will be likely to convey a false sense of assurance. Controls are there to be kept, not avoided. For instance, exception reports should be followed up. Senior management should set a good example about control compliance. For instance, physical access restrictions to secure areas should be observed equally by senior management as by junior personnel.

Components of Internal Controls

Components of internal control also depend upon the structure of the business unit and nature of its operation. The COSO Report describes the internal control process as consisting of five interrelated components that are derived from and integrated with the management process. The components are interrelated, which means that each component affects and is affected by the other four. These five components, which are the necessary foundation for an effective internal control system, include:

I. Control Environment,

Control environment, an intangible factor and the first of the five components, is the foundation for all other components of internal control, providing discipline and structure and encompassing both technical competence and ethical commitment.

II. Risk Assessments,

Organizations exist to achieve some purpose or goal. Goals, because they tend to be broad, are usually divided into specific targets known as objectives. A risk is anything that endangers the achievement of an objective. Risk assessments is done to determine the relative potential for loss in programs and functions and to design the most cost-effective and productive internal controls.

III. Control Activities,

Control activities mean the structure, policies, and procedures, which an organization establishes so that identified risks do not prevent the organization from reaching its objectives.
Policies, procedures, and other items like job descriptions, organizational charts and supervisory standards, do not, of course, exist only for internal control purposes. These activities are basic management practices.

IV. Information and Communication, and

Organizations must be able to obtain reliable information to determine their risks and communicate policies and other information to those who need it. Information and communication, the fourth component of internal control, articulates this factor.

V. Monitoring

Life is change; internal controls are no exception. Satisfactory internal controls can become obsolete through changes in external circumstances. Therefore, after risks are identified, policies and procedures put into place, and information on control activities communicated to staff, superiors must then implement the fifth component of internal control, monitoring.

Even the best internal control plan will be unsuccessful if it is not followed. Monitoring allows the management to identify whether controls are being followed before problems occur. In the same way, management must review weaknesses identified by audits to determine whether related internal controls need revision.

Tools for Monitoring of Risk

Management Information System

M.I.S or Management Information System is the collection and analysis of data in order to support management’s decision with respect to the achievement of objectives mentioned in the policies and procedures and the control of various risks therein.

It is this area i.e. M.I.S, where I.T can play a vital and effective role as with the help of I.T large information may be analyzed efficiently and with accuracy, so that effective decision may be taken by the management without the loss of any time.

Asset-Liability Management Committee (ALCO)

In most cases, day-to-day risk assessment and management is assigned to a specialized committee, such as an Asset-Liability Management Committee (ALCO). Duties pertaining to key elements of the risk management process should be adequately separated to avoid potential conflicts of interest – in other words, a financial institution’s risk monitoring and control functions should be sufficiently independent from its risk-taking functions. Larger or more complex institutions often have a designated, independent unit responsible for the design and administration of balance sheet management, including interest rate risk. Given today’s widespread innovation in banking and the dynamics of markets, banks should identify any risks inherent in a new product or service before it is introduced, and ensure that these risks are promptly considered in the assessment and management process.

Corporate Governance Principles

Corporate governance relates to the manner in which the business of the organization is governed, including setting corporate objectives and a institution’s risk profile, aligning corporate activities and behaviors with the expectation that the management will operate in a safe and sound manner, running day-to-day operations within an established risk profile, while protecting the interests of depositors and other stakeholders. It is defined by a set of relationships between the institution’s management, its board, its shareholders, and other stakeholders.

The key elements of sound corporate governance in a bank include:

a) A well-articulated corporate strategy against which the overall success and the contribution of individuals can be measured.

b) Setting and enforcing clear assignment of responsibilities, decision-making authority and accountabilities that are appropriate for the bank’s risk profile.

c) A strong financial risk management function (independent of business lines), adequate internal control systems (including internal and external audit functions), and functional process design with the necessary checks and balances.

d) Corporate values, codes of conduct and other standards of appropriate behavior, and effective systems used to ensure compliance. This includes special monitoring of a bank’s risk exposures where conflicts of interest are expected to appear (e.g., relationships with affiliated parties).

e) Financial and managerial incentives to act in an appropriate manner offered to the board, management and employees, including compensation, promotion and penalties. (i.e., compensation should be consistent with the bank’s objectives, performance, and ethical values).

f) Transparency and appropriate information flows internally and to the public.

Tools mentioned above can be utilized in identifying and managing different risks in the following manner:

I. Credit Risk

It is managed by setting prudent limits for exposures to individual transaction, counterparties and portfolios. Credits limits are set by reference to credit rating established by Credit Rating Agencies, methodologies established by Regulators and as per Board’s direction.

o Monitoring of per party exposure

o Monitoring of group exposure

o Monitoring of bank’s exposure in contingent liabilities

o Bank’s exposure in clean facilities

o Analysis of bank’s exposure product wise

o Analysis of concentration of bank’s exposure in various segments of economy

o Product profitability reports

II. Market

Financial Institutions should also have an adequate system of internal controls to oversee the interest rate risk management process. A fundamental component of such a system is a regular, independent review and evaluation to ensure the system’s effectiveness and, when appropriate, to recommend revisions or enhancements.

Interest rate risk should be monitored on a consolidated basis, including the exposure of subsidiaries. The institution’s board of directors has ultimate responsibility for the management of interest rate risk. The board approves the business strategies that determine the degree of exposure to risk and provides guidance on the level of interest rate risk that is acceptable to the institution, on the policies that limit risk exposure, and on the procedures, lines of authority, and accountability related to risk management. The board also should systematically review risk, in such a way as to fully understand the level of risk exposure and to assess the performance of management in monitoring and controlling risks in compliance with board policies. Reports to senior management should provide aggregate information and a sufficient level of supporting detail to facilitate a meaningful evaluation of the level of risk, the sensitivity of the bank to changing market conditions, and other relevant factors.

The Asset and Liability Committee (ALCO) plays a key role in the oversight and coordinated management of market risk. ALCOs meet monthly. Investment mandates and risk limits are reviewed on a regular basis, usually annually to ensure that they remain valid.

Risk Management and Risk Budgets

A risk budget establishes the tolerance of the board or its delegates to income or capital loss due to market risk over a given horizon, typically one year because of the accounting cycle. (Institutions that are not sensitive to annual income requirements may have a longer horizon, which would also allow for a greater degree of freedom in portfolio management.). Once an annual risk budget has been established, a system of risk limits needs to be put in place to guard against actual or potential losses exceeding the risk budget. There are two types of risk limits, and both are necessary to constrain losses to within the prescribed level (the risk budget).

The first type is stop-loss limits, which control cumulative losses from the mark-to-market of existing positions relative to the benchmark. The second is position limits, which control potential losses that could arise from future adverse changes in market prices. Stop-loss limits are set relative to the overall risk budget. The allocation of the risk budget to different types of risk is as much an art as it is a science, and the methodology used will depend on the set-up of the individual investment process. Some of the questions that affect the risk allocation include the following:

* What are the significant market risks of the portfolio?

* What is the correlation among these risks?

* How many risk takers are there?

* How is the risk expected to be used over the course of a year?

Compliance with stop-loss limits requires frequent, if not daily, performance measurement. Performance is the total return of the portfolio less the total return of the benchmark. The measurement of performance is a critical statistic for monitoring the usage of the risk budget and compliance with stop-loss limits. Position limits also are set relative to the overall risk budget, and are subject to the same considerations discussed above. The function of position limits, however, is to constrain potential losses from future adverse changes in prices or yields.

III. Liquidity Risk

The Basel Committee has established certain quantitative standards for internal models when they are used in the capital adequacy context.

a. Allocation of capital into various types of business after taking into account the operational risks i.e. disruption of business activity, which has especially increased due to excessive EDP usage

b. Allocation of the capital is also made amongst various products i.e. long term, short term, consumer, corporate etc. considering the risks involved in each product and its life cycle to avoid any liquidity crunch for which gap analysis is made. This is the job of ALCO

c. For instance Contingent liabilities not more than 10 times of capital,

d. Fund based not more than 6 times of capital

e. Capital market operations not more than 1 time of capital

f. However these limits cannot exceed the regulations.

g. Parameters of controls

o Regulatory Requirements

o Board’s directions

o Prudent practices

For liquidity management organizations are compelled to hold reserves for unexpected liquidity demands. The ALCO has responsibility for setting and monitoring liquidity risk limits. These limits are set by Regulatory Bodies and under Board’s directions keeping in mind the market condition and past experience.

The Basel Accord comprises a definition of regulatory capital, measures of risk exposure, and rules specifying the level of capital to be maintained in relation to these risks. It introduced a de facto capital adequacy standard, based on the risk-weighted composition of a bank’s assets and off-balance-sheet exposures that ensures that an adequate amount of capital and reserves is maintained to safeguard solvency. The 1988 Basel Accord primarily addressed banking in the sense of deposit taking and lending (commercial banking under US law), so its focus was credit risk.

In the early 1990s, the Basel Committee decided to update the 1988 accord to include bank capital requirements for market risk. This would have implications for non-bank securities firms.

Thus, the formula for determining capital adequacy can be illustrated as follows:

= Tier I + Tier 2 + Tier 3 *- 8% .

Risk-weighted Assets + (Market Risk Capital Charge x 12.5)

IV. Operational Risk

To manage this risk documented policies and procedures are established. In addition, regular training is provided to ensure that staffs are well aware of organization’s objective, statutory requirements.

o Reporting of major/ unusual/ exceptional transactions with respect to ensuring the compliance of the principles of KYC and Anti-money laundering measure

o Analysis of system problems


For any business to grow and stay in the market management style is a key and Risk management is basically the management style of managing the risks.

It is so important and that State Bank of Pakistan plans to replace Prudential Regulations with Risk management guidelines, which will be adopted by banks according to their size and complexity of operations.

Risk is inherent in every business and every organization has to manage it according to its size and nature of operation because without it no organization no organization can survive in long run.

Nigerian Enterprise Development and Revolution – An Eye on Banking and the Financial Sector

In August this year, the Nigerian government was forced to pump $2.6 billion into five troubled banks after realising their base capitals had plummeted to levels that threatened the entire financial system. The move has awakened deep concerns about the state of affairs in Africa’s second largest economy where banking is strategic to financial stability. While it may be too early still to speculate on how this affects investor attitudes, the government is confident in its intervention based on the sheer potential of the economy.

Financial sector reforms were first brought about in 1987 as part of the government’s Structural Adjustment Programme, aimed at correcting repressive policies, high reserve requirements and entry restrictions to the banking industry. The first measures were targeted at the capital market and included the deregulation of interest rates, a move to indirect monetary controls and licensing of new banks. The objectives of this round of reforms centred on promoting more efficient systems of credit allocation, promoting competitiveness in the financial system and fortifying regulatory mechanisms. However, despite the considerable anticipation surrounding the process, the net results of the first reforms were disappointing. Even though interest rates reacted positively to the financial liberalisation, actual rates remained negative during the reform years, averaging -13% against an earlier -7.6%2. Further, the banking sector that was created as a result of these reforms turned out to be risky and undercapitalised and brought in lower returns than in the pre-reforms era. It was not until 1991 that Nigeria spelt out another phase of guidelines for bank regulation, by which time banks had become immune to the imbalances plaguing the system.

Nigeria’s erstwhile agricultural economy was transformed almost overnight during the oil boom of the ’70s, when the discovery of huge crude and gas reserves prompted extraordinary growth. Oil revenues boosted per capita GDP up from $220 in 1971 to $1,100 in 1980. The dramatic change in fortunes, however, was accompanied by negligent and grossly ineffective administering that eventually destabilised the economy and devastated non-oil sectors. Growth indicators plunged as the country descended into social and political chaos amid rising inflation, unemployment and poverty. The collapse of oil prices in the early ’80s finally sealed Nigeria’s fate and confirmed its position among the poorest nations of the world.

More than 54% of Nigeria’s 148 million people currently live in abject poverty on an income of less than $1 per day3. The country faces large-scale macroeconomic imbalances and massive infrastructure deficits that hinder inclusive growth and create threatening levels of unemployment and inflation. Corruption and legislative emasculation are further causes behind the “Nigerian Paradox” of acute economic underachievement despite a mammoth capital of natural and human resources. Although Nigeria is the second largest economy in the continent after South Africa, its present per capita GDP of $1,418 ranks it among the smallest.

National ambitions for rapid and sustainable growth were revived only with the return of political stability at the end of the last century. Abuja signed the UN Millennial Declaration for universal human rights and adopted the ambitious Vision 2020 goal as part of efforts to emerge as a competitive player in both regional and global financial systems. Since then, successive governments have concentrated on driving explosive enterprise development in the SME sector to propel the economy along high growth curves. In the context of this objective, the following are some of major obstacles facing the Nigerian banking industry:

* Unprofitable operations due to liquidity constraints and poor asset qualities.
* Disregard for small and medium savings in favour of large public sector deposits.
* Inept corporate governance, proliferation of unethical practices and non-compliance with regulatory mechanisms.
* Meagre capital base, even for banks that qualify the revised minimum requirement of $15 million for new banks.
* Insolvency, often forced by operating losses that wipe out shareholder investments.

The final phase of Nigerian reforms introduced since 2001 have been responsible for several positive developments, including an impressive 7% growth in the non-oil sector between 2001 and 20073. A bank consolidation programme was implemented in 2004 to enhance credit availability to the private sector, especially small businesses. The degree of success attending these policies is perhaps reflected only in comparisons. As of 2004, there were 89 banks operational in Nigeria, the large majority with a capital base of less than $10 million. South Africa, on the other end, had one bank with more branches and assets than all 89 put together4.

Nigeria’s quest for economic resurgence is inherently tied to the health of its banks. The following are some of the key measures necessary for this sector to help bring about a much-needed enterprise revolution:

* Significant enhancement in the minimum capitalisation for banks, together with phased withdrawal of public sector funds from commercial bank deposits.
* Establishment of a competent regulatory and oversight authority to prevent insider trading and ethical malpractices and optimise banking efficiency.
* Strengthening of applicable legal frameworks and better enforcement of existing banking laws to avoid fiscal mismanagement and failures.
* Enhanced cooperation between banks and the Economic and Financial Crimes Commission of Nigeria to prevent misconducts and promote transparency.
* Consolidation of banks through mergers and acquisitions to increase availability of finance for long-term infrastructure development projects.

Repositioning the banking sector to promote rapid development remains a formidable task for Nigeria – one that is certain to determine the outcome of its long-term goals. Government reforms and regulation alone are patently unequal to meeting this critical challenge, and if the SMIEIS programme is any indication, a lot depends on innovations that are eventually driven from within Nigeria’s banking sector.

Important Before Starting Investing in the Financial Sector

Each person would not want to lose in investing and of course everyone else will want a profit, but many people do not know how in order to profit by minimizing losses, therefore you need to consider the following tips.

Savings in the Bank or deposit at this time is not advantageous because interest rates are “single digits” cannot keep inflation well above average. In other words, our money is increasingly shrinking in value and its value is smaller. For that many people begin to look to the path started in the real sector investment (purchase of land, property, business, etc.) and financial sector (stocks, bonds, mutual funds, etc.) so the money can be fully utilized.

Perhaps you know that investing in the financial sector today is more practical and does not require substantial capital when compared to the real sector. Also sometimes investing in the financial sector is much more profitable, especially if managed well by you, the Fund Manager and investment company. Therefore many people have started to glance at the investment in this sector, but investment in the financial sector itself contains a higher risk than investment in real sector. If you are someone who relied on the principle of “No Risk No Gain” and the spirit of an investor who wants to exploit all the opportunities that exist, then you should read this article further, if not ignore it.

To invest in financial management are many things to know and learn first, especially for a beginner (newbie) in order to avoid the losses and profits enjoyed success in the future. So the point is a beginner should be a lot to know and a lot to learn, therefore we present important tips for beginners in investing in the financial field as an initial guide:

1. Identify the risks

Before you invest you need to know in advance what risks you will face. If we talk so bitter that you are facing the worst risks of an investment is to lose all your investment money and you should be ready about it if you want to invest unless you are investing in instruments that are either guaranteed by a bank guarantee, insurance, government or other entities that have authority for it. Many marketing investment or people with the promotion of an investment (marketer) will not tell this to you when it invites you to invest as it is a taboo for a marketer and you will definitely not be afraid and investments are offered to follow them when already know this. Usually the benchmark risk is the profit given by the company that made the guidelines, the greater the profit given the higher risk (High Profit High Risk).

2. Know your company’s investment

It’s one of the most important things if you want to invest safely and peacefully. You certainly want your money and in culturing the night you can sleep in peace without a headache thinking about your money is safe or not. For that you should first find out whether an investment company that you believe it is safe or not. How is their service to you, your question is answered or not when you call, easy or not to contact the investment company. Business license and registration are also sometimes important to know. Where the company can determine whether or not bona fide companies. Indeed, many investment companies that are not clear and some even have a fake license. If you want to invest a lot of money in an investment company, you really should check the condition and status of the company concerned.

3 Careers Within The Financial Sector To Look For Work

A career in the financial services sector used to mean being an insurance salesman, banker or accountant. But that has changed. Over the years, financial careers have expanded in to smaller niche, or specialised areas that require specific knowledge and education.

The demand within these specific areas of the financial sector is continually increasing worldwide, below are 5 areas within the financial sector that you may find a career in:

Financial Planner

With a career as a financial planner your employment opportunities are varied, but in great demand. You could find employment with banks, insurance companies, superannuation funds or you could start your own business that provides financial planning advice. The financial planner career has been in hot demand and is expected to continue to increase. Two major factors in the increasing demand for financial planners is technology and the increase in self funded baby boomers reaching retirement age.


Bookkeepers must be extremely comfortable with numbers, recording data accurately and a good ability to solve problems. As the majority of your work will be done electronically, it is also good to have accurate typing skills and be comfortable using a computer as you may need to learn a range of software to make your work easier and more efficient.


An accountant is a vital team member of a business and they are also needed by individuals, this makes the profession in high demand. Duties vary depending on your area of employment and specialty, for example; public accountant, government account, management accountant or an internal auditor accountant. Your required skills will also vary depending on your specialty; however you must be comfortable with numbers, have an attention to detail and an in-depth knowledge of laws and regulations related to your area of specialty.

There are many other areas within the financial sector that you can find a career in that are also in demand. If you want to pursue a career in finance, you should consider your local market place and determine a service that is in high demand and specialise in that field if it is of interest.

To get started in your quest for a career in finance, you will be required to successfully complete a related finance course. These can be completed at private and public college institutions, universities and online. Before you start your course, it is advised that the outcome is recognised within the field as a qualification.

Supermarkets and the Financial Sector

The financial sector in the UK is very very broad – perhaps one of the broadest in Europe – with very few barriers to entry for the large corporations who can show a high degree of financial strength. One group of companies who have really opened up to the loans, insurance and general financial sector are the supermarket – with influential giant Tesco again leading the way.

Why are the supermarkets so influential?

The main reason why the supermarket giants are so influential is their size, and the fact that they touch almost every member of the population of the UK, on a regular basis. It comes down to that old fashioned human trait, ease of access – or laziness as some may describe it!

The more items and services which are available in one shopping trip, the more chance of more and more people taking advantage. While shoppers were initially wary of buying financial products from their local supermarket, this scepticism soon disappeared on the back of massive advertising campaigns by the majors. It seems that every store you visit now a days offers extremely attractive loans or saving rates.

While the headlines and advertising will refer to Tesco for example, the majority of these services are administered by a banking partner, who will administer the service on behalf of the supermarket group.

What Are The Advantages And Disadvantages?

While the pros and cons of this type of service may differ from person to person, there are a few common aspects to consider.

The advantages are fairly simple:

· One stop shopping – your every day needs under on roof.

· Attractive rates – because the supermarkets enjoy your custom with or with out any financial services purchases, any additional business they receive is a bonus. That way they can offer very attractive rates, with their traditional banking partners running the service.

· Simple – fill in a form, post, and await their reply.

The disadvantages are:

· Lack of advice. The majority of these services are postal application – with no advice given.

· Lack of accessibility. While traditional banks offer a walk in service, this is very often not the case with the supermarket financial service arms, making them less attractive for many potential customers.

There is no doubt that the supermarkets have given the more traditional banks something to think about, due in the main to their every day access to potential new customers. Customers who are often very trustworthy of a particular supermarket brand, while maybe a little less trusting of the traditional banking community.