Risk analysis is an interesting field, but a lot of skills are required to analyze financial information, forecast future economic trends, and make the right decisions for your clients. This is why employers are very picky when it comes to hiring risk analysis; they usually ask technical and general questions that are recommended in HR manuals.
Common questions you will encounter during a risk analyst interview include questions about your motivation, organization, and methodology. You will also have to discuss more technical questions about corporate finance, data gathering, and risk analysis.
This article is a compilation of the most common questions you may be asked during a risk analyst interview, along with some elements and things to consider when crafting your answer. Whether you have experience as a risk analyst or are just starting your career as one, the answers below will help you succeed in your interview.
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1. Why Do You Want to Work as a Risk Analyst?
The first and one of the most fundamental questions you will get asked is why you want to be a risk analyst. Your answer will vary a bit depending on whether you are interviewing for an entry-level job or hoping to advance your career in a senior position.
If you are applying for an entry-level job, you must explain why you want to start your career as a risk analyst. You should think back to when you first started thinking about a career in the field and what made you decide to pursue one.
Perhaps you really enjoyed the classes in school you took that relate to the risk analysis field. Or, you might have had an internship where you were introduced or exposed to the work of a risk analyst, and you want to explore it further. Alternatively, you might have met someone who works as a risk analyst and enjoyed talking to them about their work.
On the other hand, if you have experience as a risk analyst, you will need to explain why you enjoy your previous or current work experience and why you want to continue in the field.
To do this, consider your experience and why you have enjoyed your work. Some ideas to consider include:
- Related tasks you enjoy
- Projects you enjoyed working on
- A risk analysis team you were a part of, and how you would like to bring that experience to a new position or company
Your answer should express what you love about risk analysis and why you think you are right for a higher position.
Why you want to start or continue working as a risk analyst may also relate to the question, “What inspires you?” Be prepared to answer one or both of these questions.
2. What is a Good Debt-to-Equity Ratio and Why?
After the first introductory question, employers like to test your technical skills. They often start with an easy question that has to do with the definition of a concept of risk analysis. For example, the interviewer might ask you to define the debt-to-equity ratio, compute it for a given example, and provide an interpretation.
Here is a sample answer:
The debt-to-equity ratio measures a company’s total debt relative to the amount initially invested by the owners and the earnings that have accumulated over time. It can be computed by dividing the total liabilities by the shareholder’s equity.
A good debt-to-equity ratio can vary from industry to industry, but it generally sits around 2-2.5. This indicates that for every dollar invested in the company, 66 cents comes from debt, while 33 cents comes from the company equity.
On the one hand, a low debt-to-equity ratio indicates that a company has accumulated a lot of money over the years. But it can also be a sign that resource allocation has been neglected. On the other hand, a high debt-to-equity ratio is more problematic; it indicates that the company has too much debt and might be on the verge of bankruptcy.
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Finally, the debt-to-equity ratio is one of the most crucial metrics that banks look at before agreeing to lend money. Therefore, ensuring that is stays below a certain threshold is vital for the company’s longevity.
3. What Skills Do You Have That Will Make You Successful as a Risk Analyst?
You also need to convince the interviewer that you have the skills necessary for the risk analyst role.
If you are applying for an entry-level position in the risk analysis field, you will not be expected to have many skills you picked up from a prior job. However, you need to explain what you learned in school and during an internship.
An example could include a summer job where you learned skills, such as problem-solving or teamwork. You could discuss these skills and how you believe they will help you in the role you are applying for.
Here are some of the most important skills you need to have as a risk analyst:
- Statistical analysis and the ability to use analytical tools to produce information and results
- Public speaking skills and the ability to translate what you are doing and learning in your role to others, even those with little to no knowledge of your work
- Problem-solving and the ability to manage multiple tasks simultaneously.
- Attention to detail and the ability to review your work and correct any mistakes
- Critical thinking and being able to find ways to improve your role, the company, and your client’s financial positions
- Educational classes or a degree in a field such as finance, economics, or mathematics
Make sure you have most, if not all, of these skills, so you can explain where you developed them and how you have put them into practice.
Furthermore, if you have experience in risk analysis, you need to explain which of these skills you possess and how you have developed them throughout your career. For instance, if you led a large project, you could use that to explain your leadership or time management skills.
4. How Do You Compute a Company’s Operating Cash Flow Knowing Its Net Income?
After the initial questions, the job interview will definitely get more technical, and the interviewer will most likely ask you to compute metrics based on real-life scenarios. A typical question that you might be asked is to compute a company’s operating cash flow knowing its net income.
An easy question in this category could be:
Consider a company with $250,000 net income, $100,000 non-cash expenses, and $50,000 change in working capital. What is it’s operating cash flow?
And the sample answer to the question:
The operating cash flow quantify a company’s ability to generate cash from its normal operations.
The operating cash flow can be computed by adding the net income to the non-cash expenses and substracting the change in working capital. In this particular case, the company has an operating cash flow of $300,000.
5. Do You Have Any Past Experience as a Risk Analyst?
If you are interviewing for an entry-level position, you will not be asked this question since they know you do not have any experience.
However, this is one of the most important questions when applying for a more senior-level risk analyst position. If you have some experience, you need to explain how that experience has prepared you for the new position.
Consider the tasks you performed in the previous role that are similar to those in the new position’s job description. Even if they are not entirely the same, you could explain how you went about fulfilling them and how you tackled and resolved problems.
You could also talk about the tasks that are not directly related to your current job but mention how they prepared you for this new position.
6. Why Do You Want to Work as a Risk Analyst for X Company?
Next, you need to consider why you want to work for the company you are interviewing with for the risk analyst position.
Browse their website and learn about the company so that you can discuss their corporate values, special projects, or goals if asked or if you want to show that you are enthusiastic.
You might want to work for a company of their size and relate to their motto. Or perhaps you have heard good things about the company through a reference to the company culture.
If you see online or find out another way that the company does charity events or other similar events that interest you, consider mentioning that too.
Also, don’t say anything negative about your previous company, as your new company does not want you to say the same things about them. If they ask why you are leaving there, be neutral.
7. How Would You Spend Your Day as a Risk Analyst?
Another common question you may be asked during your interview is about how you would spend a typical day and prioritize your time and tasks.
Suppose you are applying for an entry-level position. In that case, the interviewer may give you a list of tasks you may encounter during a typical day, such as compiling reports, meetings with clients, and doing financial analysis. You will then have to explain how you would organize your day and why you would do it that way.
If you have experience in the field, they may ask you to explain what you did during a typical day at your previous job and what happened if you encountered any issues, unexpected deadlines or emergencies during the day.
If you need some help with this question, especially if you are unfamiliar with what types of jobs and tasks you may have in a risk analyst role, check out some of the current risk analyst job listings. These listings should give you a good idea of what things you may encounter during a normal day in your role and what tasks you should be able to organize into an example schedule.
8. You Discover That a Long-Term Client Lacks Creditworthiness. How Would You Handle This Situation?
During a risk analyst job interview, there is a good chance you will be exposed to an unexpected or stressful situation. Employers ask these questions to make sure the candidate can handle the stress of the job and come up with creative solutions.
During these boilerplate questions where there are no clear answers, it is crucial to keep a cool head. A typical answer would be:
It is a balancing act between keeping good client relationships and minimizing risks. The ultimate answer would depend on the specifics of the situation.
Given the opportunity, I would report the issue and establish how important the client is to the business. If I were unable to provide a solution, I would discuss it openly with the client and try to negotiate an alternative that would benefit both parties.
9. How Will You Continue To Improve Your Skills as a Risk Analyst?
Being successful in landing a role as a risk analyst is not enough, and you should continue to improve your skills as you grow in your job.
If you have experience as a risk analyst, you should already have experience improving your professional skills. You can touch briefly on how you have spent time improving your skills in your current or past role. Then, talk about how you plan to continue improving them in the new role.
Also, if you have some skills you have already focused on improving, think about some you have focused on less and how you may be able to work on those in your new role. If you are moving to a new company, they may have ways to help you improve certain skills, including training sessions, programs, or even crossover events with different types of analysts.
If you are new to the risk analyst field, you may not have had too many opportunities to already improve your skills. So, think of the specific skills you want to improve as you start your work and how you plan to do that.
However, you can also talk about any skills you may need for the job that you do not have experience with yet. For example, maybe you will focus on credit risk analysis in the role you are applying for but are also interested in market risk analysis. You can talk about how you will spend your free time learning about it and even talk with people in the company who do that type of work and learn from them.
10. What Weaknesses Do You Have That You Want to Improve as a Risk Analyst?
On the other hand, you will also have to talk about any weaknesses you have that you need to improve as you start or continue to work as a risk analyst.
If you are new to being in a risk analysis role, you may not have any specific examples for this question, but that is fine. Consider some general skills you may struggle with, such as problem-solving or communication. Talk about the times you may have struggled with these skills, like in school or during an internship, and how you have tried to improve them. Also, mention how you want to continue to improve them and how you think you can do so in your new role.
If you have experience in risk analysis, think about what you may have struggled with in your previous role. You might have had a certain task you had trouble with, or you can talk about a general skill like public speaking or organizational skills.
Even though this question focuses on your weaknesses, try to put a positive spin on the question and talk about how, even though this is a weaker skill you have, you have still tried to work on it, and you will continue to do so.
Otherwise, you might have experience in one field of risk analysis, but the new role would be in another one. Talk about how you learned how to work in your previous role and how you plan to take those skills and use them again to learn this new role.
11. How Can We Help You Thrive as a Risk Analyst?
Finally, consider the new company, the types of people you will be working with, and your new role. How will you fit in well, and what support do you need to succeed in your new role?
Maybe you rely on the support of your colleagues for a lot of your success, or maybe you are in an entry-level position and want a specific mentor to look up to as you learn.
This question might be easier to answer if you have experience in a risk analyst role or at least in a similar role where you know what works best for you and what may hinder your ability to work and be successful.
Think about you and how your company and coworkers will best support you in your new role. You want to help the company, but you also want to have any help from them, so be honest in this question, and you can set yourself up for success.
12-19. More Questions to Prepare for Your Risk Analyst Interview
Here are alternative questions that an employer might ask you during a risk analyst job interview:
- How to calculate cash flow from investing activities?
- How to calculate cash flow from financing activities?
- How to compute the free cash flow of a company?
- What is a Credit Default Swap?
- How does a balance sheet or cash flow statement help you in determining credit risk?
- What financial software have you used in the past?
- What is your process for collecting and analyzing data?
- Which metrics are the most important to determine the risk profile of a company?