Private Equity Risk Managers
Exploring this Job
Talk with a risk manager about the field. Ask your school counselor or business teacher to help arrange an interview. You should also check out a copy of New Strategies for Risk Management in Private Equity (Private Equity International, 2014) in your college or local library to get a detailed understanding of this career.
Join RIMS—The Risk Management Society, RMA-The Risk Management Association, and other professional associations as a student (college) or professional member to network and learn more about the field. The Spencer Educational Foundation, affiliated with RIMS, provides annual scholarships to academically outstanding full-time students of risk management and insurance. It also offers the Spencer-RIMS Risk Management Challenge (https://www.rims.org/community/students/spencer-rm-challenge), a competition for college students in the U.S. and Canada. Student teams receive a case study and must develop the best and most comprehensive risk management program to address the issue.
According to the European Private Equity and Venture Capital Association, the most common types of risk are:
- "Funding Risk: The unpredictable timing of cash flows poses funding risks to investors. Commitments are contractually binding and defaulting on payments results in the loss of private equity partnership interests.
- Liquidity Risk: The illiquidity of private equity partnership interests exposes investors to asset liquidity risk associated with selling in the secondary market at a discount on the reported net asset value.
- Market Risk: The fluctuation of the market has an impact on the value of the investments held in the portfolio.
- Capital Risk: The realization value of private equity investments can be affected by numerous factors, including (but not limited to) the quality of the fund manager, equity market exposure, interest rates, and foreign exchange.”
Major duties of private equity risk managers include:
- identifying, analyzing, and assessing all risks for the PE fund using mapping tools and other resources
- managing the risk management process, including implementing and monitoring stress, back-tests, and sensitivity analysis for funds and firm assets
- designing and implementing (with approval by the managing partner or board of directors) risk management protocols
- staying abreast of market developments and assessing their potential positive or negative effects on portfolio companies
- preparing oral and written reports for managing partners and members of the board of directors