Financial risk analytics is a rapidly evolving function in the modern age financial sector due to increased responsibility on the risk analysts to not only provide solutions concerned with risk management but also expected to preempt any financial catastrophe. To perform these roles and functions efficiently, financial risk analysts need to have a solid understanding of the various analytical techniques used in financial markets such as equity, interest rate, foreign exchange, etc.


Finance courses certification is a conglomeration of all analytical techniques involved in the treasury, risk, and investment management. These programs not only focus on core financial risk analytics concepts but also include quantitative techniques as well as macro-economic indicators for successful investment and wealth planning.

Let’s study the concept of financial risk analytics in detail.


Financial Risk Analysis Concepts


Financial risk involves a conceptual understanding of several factors that contribute to its understanding. The concepts are highlighted below:-


  1. Risk and the Cost of Equity

An investor will only invest in a stock if he/she is sufficiently compensated for the financial risk with potential returns. The additional return is otherwise considered as the cost of capital. This cost of capital is estimated by:-


  • Capital asset pricing model (CAPM)
  • Arbitrage pricing theory (APT)
  • Multi-factor model (MFM)


  1. The Balanced Scorecard System

The balanced scorecard system, developed by Drs. Robert Kaplan and David Norton are used by Governments, non-profit organizations, businesses and industries as a tool for strategic planning. The scorecard offers a balanced view of the financials of an organization. The purpose is to understand and create a common goal for the organization, evaluate its performance, and improve communications.


  1. Analysis of the Cash Risk Flow

Experts use both net worths as well as cash flow statements for the purpose of assessing the cash flow risk. The net worth helps generate a number that would represent the financial situation at hand. As for a cash flow statement, it adds together all the expenses as well as income to understand whether an organization has positive cash flow or a negative one.


  1. Analysis of Employment Risk

This analysis is rather beneficial for borrowers. Borrowers are required to take a closer look at their current job situation. Unless you are working in the government sector where the threat of being shown the pink slip is rare, you need to be mindful of remaining in employment throughout the duration of the loan period. A loss of a job can ruin your credit and throw your financial situation into a quandary.


End Notes


Financial risk management is important for any organization who wants to expand and grow. In order to understand the complexities of financial risk analytics, you need to acquaint yourself with the nuances of financial risk. A financial risk management certification can help you do just that. Finance courses certification provides a practical introduction to the concept of financial risk analytics with a focus on data-driven modelling, and statistical estimation of credit and market risks. One such course if the financial risk management certification from IIM Kozikihde, offered on the Talentedge platform. The course intends to provide practical knowledge, imparted through live and interactive learning exercises to develop hands-on skills that can be applied to practical scenarios.


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