Do traders look down on risk managers?

I heard that traders look down on risk managers. And because of the nature of their jobs, they always conflict with each other. What’s the reality of the work environment for traders and risk managers like? I want to work as a risk manager in the future

Not sure if it’s “looking down”, but risk management is a middle office sort of function, so it is lower on the organizational and compensation scale. The reporting lines are generally independent from one another, but in finance, revenue producers will always receive the most recognition. Take that how you want.

a few types of traders, but the ones who like to think they are the center of the universe tend to look down on everyone that isnt them (including other traders, IB guys, research etc.) there are other types that usually understand that support staff is needed to run a functional office

what kind of trader are we talking about because the traders of the 80s, 90s and 00s are long gone. Those traders actually had discretion (aka prop traders) but traders of today are just execution traders. There is a thread about traders…Take traders at my fund or other hedge funds. Analysts present a company to PM and then a PM or CIO decides to sell or buy. He or she will tell the trader, hey Trader, buy _____ shares of _____ today. The trader says ok. That’s it.

The “traders” at banks or brokerages are nothing more than sales people.

To answer your question, from my experience traders “look down” at a lot of people. Mostly because they don’t know anything and feel insecure. Insecure people usually argue a lot and believe they are always right. Not sure why. At the end of the day, it doesn’t matter what the traders think of a particular job.

to dive in a bit further. This coming from my exp and from what I have heard from my friends…PMs and/or CIO asks the risk managers for some of the risk and exposure levels and whether they can take such positions or not. The trader has no say he will just buy and sell whatever he is told to buy and sell at given quantity, name, and price. For smaller funds, the risk is done by the director of ops or the CFO.

Also, for my fund, when one of the two traders is out and we have heavy activity, the director of ops fills the void as the second trader.

This characterizes a certain type of bank function, and it is true that very little value is provided by different sorts of execution services in some products, other than trade ideas. However, it is untrue that all institutional sell side traders do not have significant discretion over risk positions. A great deal of financial products are illiquid or sometimes cannot be hedged immediately or at all. When a fund transacts in a large size of something like CDS or long dated options, it is extremely unlikely that its liquidity provider can unload that risk economically within a negligible time frame. Absorbing risk and deciding how to mitigate it is an important function of financial service providers. Ultimately, the decision on how to manage that risk falls to individual traders.

Wait, isn’t this an operational controls issue? I understand that it might be a small operation, but one purpose of separating ops and trading functions (and in fact, trading from portfolio management) it to provide oversight.

few funds I know have their ops team do execution trading. They all sit together in the “trading desk” like a happy fam.

Ok, I understand that some people must do it. It’s just not best practice and I don’t think you will see this setup at a large institution.

oh yeah i totally agree with that. I would imagine ops (at big banks) has their own department to themselves in a separate floor or in the case of most banks in NY, ops teams are in NJ just across the hudson river.

I work in credit risk and deal with traders every single day, multiple times a day. They ring me up asking to trade some oil swap with a dutch bank or some TARF with a crappy counterparty in Italy, or building a prop position in a UK retail HY issue.

There is no way they look down on us. We are there to say yes or not to their business. Dude if they ever took the piss i would go over there and tell them to go F themselves and suck my D. If they don’t like my decision then take it to the MD… that usually shuts them up.

99% of the time there is a mutual respect, we all have to get along and understand each others business in order to get business done.

lol I totally agree with you. Do you work in counterparty risk? If so, may I PM you with more questions?

Looking down on those who are probably more quantitatively competent and capable of doing complex maths with less difficulty wouldn’t make much sense I don’t think

Risk managers are rarely smarter or better at math than the traders they monitor.

hmmmm maybe you and i are in different fields. In every fund I have been to risk managers usually have master in financial engineering degrees. Traders on the other hand only have BA or BS…Unless the trader you are referring to is more of a PM role…PM role traders are indifferent from risk managers. Risk managers usually know how to program using either R or Python and do all kinds of mumbo jumbo…