The world as we must be aware is in a constant state of change. This holds true, especially for the financial domain. Finance, one of the most important departments of any corporation has changed considerably in the last decade. A few years back, a career in finance usually implied three labels: Accounting Finance, Taxation Finance or Banking Finance.
Since then the corporate landscape in India has become rich and diverse, there has been a lot of global integration with the presence of more MNCs. This fact combined with the plethora of options available for certifications in finance may confuse a fresh graduate.
Obtaining a degree is just the first step for a young professional. Next is facing the dilemma of choosing the career path to take, a decision often based on which jobs have the highest salary potential and which sector will continue to grow in the next years. Hence, students aspiring to make a career in Finance sector need to be aware of the new emerging qualifications & skills sets required by the industry before choosing a career path.
Areas to Explore
Investment Banking: An investment bank assists companies, individuals and governments in raising capital by underwriting and/or acting as the client’s agent during the issuance of securities. Investment banks also assist companies involved in mergers and acquisitions and provide ancillary services such as Market Making, Derivatives Trading, Foreign Exchange, Fixed Income Instruments, Commodities, and Equity Securities.
Corporate Finance: Any corporate office has different departments that look at the various aspects of the business. Moreover, the finance department is one of the backbones of any business. Recording of day to day transactions ensures that the financial health of the firm is tracked. Moreover, it is the finance department who does the job of measuring financial performance and displaying it to the stakeholders. Every transaction in the company leads to a financial implication. If you’ve rendered the services of any professional, however, not yet paid monetary compensation, it leads to a liability.
Equity Research: Most Investment Banks have an Equity Research (ER) division, which is a team of experts closely following and analyzing listed companies on an ongoing basis. They delve deep into the fundaments of the companies they cover (including industry sector and general macroeconomics), and come out with reports and ratings on whether the stock is a good buy (will appreciate in future) or hold (wait for a better time) or sell it off (likely to fall further). This is similar to a movie review by a critic, only, the movie in question is ongoing and the reviews may keep changing over time.
Project Finance: Project Financing is typically used to finance long-term projects, wherein the responsibility of debt/funds repayment resides with the given project’s cash flows, and not on the balance-sheet of the ‘sponsor(s)’ (or equity investors). The funds are provided by a single financial institution or a consortium (known as the ‘syndicate’).
Commercial Banking: Commercial banking is also known as business banking or institutional banking refers to banking products and services designed for corporations, institutions, and sometimes governments. These banks typically take deposits from customers and use that to extend loans to other customers.
Qualification to Explore
Chartered Financial Analyst (CFA): The CFA program is conducted by the CFA Institute, USA. The CFA is an internationally recognized, well-researched and wholesome financial program that aims to give the examinees an all-around knowledge of financial analysis and portfolio management. This is a highly sought after certification and is quite well known in the financial industry internationally.
Certified Financial Planner (CFP): The CFP certification is conducted by the Financial Planning Standards Board (FPSB Ltd.), based in the U.S. FPSB India is its Indian counterpart that manages and conducts the program in India. The CFP is recognized in over 24 countries and is one of the best-known certifications in the financial planning domain. It focuses on a variety of topics along the personal finance angle such as the time value of money, risk and insurance planning, retirement planning, estate planning, taxation planning, etc.
International Financial Reporting Standards (IFRS): Financial statements/reports form the backbone of Financial Analysis. Imagine a world where every firm had a different reporting format. It would be a nightmare to compare, reconcile and analyze companies, even in the same sector. This is why we have uniform standards for reporting. The International Financial Reporting Standards is one such global reporting standard adopted by the International Accounting Standards Board (IASB). It stipulates how financial statements should be presented, what should be disclosed, what elements need to be part of which statement, treatment of interest payments, leases, taxation, depreciation etc.
Chartered Institute of Management Accounting (CIMA): The Chartered Institute of Management Accountants (CIMA) based in the UK is the largest professional body of management accountants. They along with the American Institute of Certified Public Accountants (AICPA – the body that conducts the CPA exam) conduct a highly respected global program called the CIMA Professional Qualification. The focus of this program is not just in management accounting, but also on marrying finance and accounting with strategy and decision-making. This is, therefore, a course more suitable for people interested in a corporate career as opposed to just public accounting practice.
Financial Risk Management (FRM): Financial Risk is a broad term that comprises various types of risks that could cause financial loss(es) to a business. Some of the risks firms face are Interest Rate Risk, Credit Risk, Liquidity Risk, Operational Risk etc. Financial Risk Management, therefore, requires the very specialized type of knowledge. The Financial Risk Manager (FRM) program conducted by The Global Association of Risk Professionals (GARP) program aims to provide a holistic education in Financial Risk Management and is an ideal program for candidates aspiring to top Financial Risk Management profiles across firms.
Certified Public Accountants (CPA): Just like the CA qualification in India, the CPA is the highest professional qualification related to accounting in the U.S. One can move towards becoming a practising CPA by taking the Uniform CPA exam conducted by the American Institute of Certified Public Accountants (AICPA). Different states in the U.S. have a different set of requirements for accountants to be licensed to practice; however, passing the CPA exam is a common (hence called uniform) requirement across all states. Apart from the U.S., a CPA qualification is highly regarded and accepted globally, including India. With a CPA under your belt, not only can you practice Chartered Accountancy in the U.S., you can also be considered for roles involving international accounting policies in other countries. E.g.: an MNC with operations in diverse geographies would definitely be interested in hiring a CPA so that the employee is knowledgeable about global accounting policies.
Chartered Accountants (CA): Chartered Accountancy is offered by the ‘Institute of Chartered Accountants of India’ (ICAI). Chartered Accountancy has always been a very sought after professional qualification. The moment you say you are a qualified CA, people judge you as someone bright, diligent and knowledgeable. It is a rigorous course in the field of Accounting and Finance, which opens the doors to various career options in the financial domain. CAs are sought after by almost every business house for corporate finance, auditing, taxation, accounting, and legal counsel. Apart from this, since the course is challenging and demanding, a CA is considered to be a diligent person with an analytical bent of mind and penchant for numbers. Several banks and financial services firms look for CAs to fill their various financial analysis roles. CAs can also start their own practice soon after qualifying.
Association of Chartered Certified Accountants (ACCA): The Association of Chartered Certified Accountants is a global body of professional accountants based out of UK. If you want to pursue a global career in accounting, getting enrolled and completing this program will stand you in good stead. The ACCA, like the CPA (US), is a program focused on international standards in accounting and will catapult you into a global chartered accountancy career. It is also not as cumbersome to apply for and appear as the CPA (US) and could be an alternative to somebody who wants to either practice abroad or work in a global accounting setup within India.
This will surely help you identify the career options in finance and know how to make a career in this field.
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