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Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2017

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2017

MARKET OVERVIEW

 Following on from the traditional Christmas slow down, Q1 of 2017 saw a significant increase in new job flow across all areas of Credit & Risk Management. Refreshingly, as well as the usual churn following bonus payments, 2017 has seen the creation of a number of different new roles and teams.

One trend that seemed to have become more prominent in 2017 is a significant increase in the number of firms looking to secure professionals on a fixed term contract (FTC) basis, both to reduce capital costs and to increase the chances of  a candidate being retained if there is uncertainty about whether the role will be made permanent.

Role Profiles

Quantitative Analytics

Quantitative Analytics proved to be a  busy area in Q1 across both Buy and Sell Side. Many Investment Banks sought to strengthen their Model Development and Validation functions across Traded and Credit Risk, in some cases building entirely new teams to do so.

With regulatory deadlines drawing ever closer, banks are more reluctant to compromise on technical capabilities when hiring these roles, and this is necessitating greater flexibility on title, compensation and geographical location of the position (it is more and more common for quant roles to be located both outside of London and abroad). On the Buy Side  candidates with strong Equities backgrounds were in high demand. Candidates for buy side roles have had to show a very broad range of asset class knowledge and object-oriented programming skills, as well as an in-depth understanding of how their work impacts the investment process, the measurement of investment risk, portfolio construction and asset allocation. In Insurance there were a number of positions pertaining to Capital Modelling requirements around Solvency II brought to market, with these positions attracting interest from both actuarial and banking economic capital modelling backgrounds.

Credit Risk

In Q1, a wide range of Investment Banks actively sought to recruit positions in Credit Portfolio Management, Stress Testing and IFRS9 Implementation. There was a similarly lively response from the candidate side; with a greater number of professionals applying for roles on average than seen in previous years. Candidates with experience dealing with Capital Adequacy and Risk Appetite have been highly sought after and candidates with experience dealing with Emerging Markets who can speak a range of languages continue to be in high demand.

Credit Research

Based on a number of meetings we’ve had with ‘C’ level professionals in buy-side organisations, we predict there will be a significant increase in the number of front office based credit roles within

Investment Management and Hedge Funds. This is due to ongoing MiFID 2 regulation and decrease in sell-side research. This has resulted in roles becoming much more sector specific and the need for a dedicated sector expert. Moreover the implementation of ESG analysis into Credit Research is becoming increasingly important to firms with a specific emphasis in 2017.

We are holding a breakfast seminar at the end of Q2 to discuss the important of such analysis. The Head of Credit at a leading Investment Manager will be leading the seminar. For more information please contact simeon.randell@bruinfinancial.com.

Operational Risk

Investment Management firms have recognised that professionals with the right attitude and dynamism are a very valuable asset to their team/business. We have seen firms hire junior candidates who in the long run can provide a far greater investment. Many opportunities within the market at present provide the opportunity to ‘own’ the risk piece and develop within the business with great exposure and autonomy.  Many larger organisations are segregating op risk into specific areas such as RCSA’s, Policy & Frameworks and Incident Management/Error Investigation. Meaning some firms are limiting areas professionals are exposed to.

An increasing requirement at present is exposure to ICAAP Scenario Analysis, thus smaller firms provide a more attractive opportunity as the role becomes more varied and less narrow. Given Cyber Threat Security candidates with IT/Op Risk experience are also highly sought after at the senior level.  This will be a skill set in increasing demand throughout 2017. The majority of senior Operational Risk roles we have seen have been replacement hires. Given the uncertainty around the market at present professionals are demanding a significant increase in salary to move.

Operational Risk on the sell side has been relatively quiet in comparison to the buy side, however there has been an increase in the flow of Second Line of Defence roles in the latter half of Q1, and this is expected to increase in Q2 post-bonus payments.

Investment Risk

Roles here have tended to be at the junior end as firms seek analyst level candidates to assist senior risk managers with data analysis, data cleansing and report production duties. We have also seen an increase in fixed term contract positions, particularly to assist with workload peaks, especially in areas where it  is uncertain how the role will look in 12 – 18 months time once it becomes BAU or where location is uncertain given Brexit and where the role/function may sit in the future.

Hiring in our hedge fund clients has mirrored this trend and have been focused on bringing in very technical analysts with 1-3 years similar experience. Hedge funds will only consider hiring the highest calibre professionals and are increasingly targeting strong analysts with a quantitative market risk background from the top Investment Banks. These roles are the pinnacle for risk professionals in this space and therefore there is strong competition amongst candidates with relevant experience.

We predict that the more these functions evolve the

more technical and business facing these roles will become. With these investment risk functions becoming more strategic and business facing to help manage risk as opposed to ‘policing’ it, there is a strong desire for candidates with excellent softer/communication skills as well as very strong technical backgrounds.

Market Risk

In comparison to others, Market Risk has been quiet over the past quarter in the external market. However this is expected to change in Q2, as a combination of post-bonus resignations coupled with the need for firms to re-examine their Market Risk data streams should see an increase in the volume of roles coming to market.

 Women In Risk

This year the Gender Pay Gap Reporting Regulation comes into effect, which requires employers with 250 or more employees to publish statutory calculations on salaries and bonuses by gender annually.  As of April 2017 employers have up to 12 months to publish this information on their website.

BRUIN has launched a number of initiatives to support our clients in meeting their gender diversity objectives and one example is the provision of detailed salary information with which clients can benchmark themselves, including the average gender pay gap within the Credit and Risk space .

In keeping with the recent study published by the FT, our findings indicate that at the more junior levels, the salaries tend to be comparable, but there is a notable gap at the senior end illustrated below:

Picture1

This is similarly reflected in the average increase in salary achieved by men and women when moving jobs as per below:

Picture2

BRUIN can further their clients by collating gender diversity information in terms of ratios of male/female candidates approached about roles and subsequent CVs sent.

2016 Conclusions and Outlook for 2017

Following on from a busy Q1, there is likely to be an initial cooling off period in terms of new roles whilst headcount from the previous quarter is being wrapped up. This however will likely pick up after Easter as the fallout from post-bonus resignations and re-evaluation of hiring needs occurs.

This commentary has alluded in the past to the average duration of a permanent hiring process getting longer and this shows no sign of curtailing. However firms that have real appetite to hire realise that outstanding candidates are not on the market long. Processes are becoming swifter and more efficient, especially within Investment Management.

Overall Q1 has been very positive from a recruitment perspective. Financial services firms are still displaying a significant appetite in London. Following the formal triggering of Article 50, one can only hope that this trend continues into the next quarter.

For more information about credit & risk management market please contact one of our consultants.