Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q3 2016

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q3 2016

MARKET OVERVIEW

With all of the uncertainty and political haranguing around Brexit, and stories of financial strife within Investment Banking, it would be easy to infer that Q3 was a quarter of inertia and general pessimism from a recruitment perspective.  However, to tar all of financial services with the same negative brush would be unfair. Firms who are in a strong position financially and have faith in their strategies for profiting in tough market conditions continue to be keen to invest in new talent to realise their ambitions.  Equally, those in a weaker position are looking to the market to find people who can bring around a change in fortune. Consequently job flow has remained steady compared to Q3s of previous years in the Credit and Risk Management space.

From a skillset demand perspective, regulatory pressures continue to dictate hiring across Investment and Corporate Banking. Q3 saw a significant increase in appetite to hire professionals with experience within Wholesale and Retail Credit from an analytics and BAU/change perspective, as firms look to strengthen with the IFRS9 implementation deadline in January 2018 in mind. A number of buy-side organisations who are looking to make investments within project finance and infrastructure are seeking professionals from Investment Banking and Ratings Advisory to change the way they invest in this space. With Finance and Risk functions moving closer together in certain organisations there is a necessity for candidates with strong enterprise wide Risk knowledge to be combined with ICAAP analysis.

What is becoming apparent from a candidate perspective is that professionals who work for FS firms in strong positions are becoming harder to prise away, even with large compensation/ responsibility increases. Candidates are becoming more selective about presenting themselves for opportunities in the current climate of uncertainty. The days of professionals moving to similar jobs, at similar organisations just for a salary increase are coming to an end. For firms to secure hires, the ability to differentiate positively between the opportunities on offer compared to staying put is of paramount importance. For this reason, recruiters need to be armed with an abundance of information on opportunities to align them with candidate motivations and attract candidates from alternative backgrounds. For similar reasons, hiring processes that are elongated and take months will disengage candidates and ultimately make them unobtainable for the firm.

Marketing: Role Profiles

Credit Risk

As previously mentioned, given the pending 2018 deadline for IFRS9 implementation, the Credit market is very buoyant across Banking and Consultancies. Also, Emerging Markets  Banks have been hiring Credit Analysts across FI, NBFI and Corporate sectors. In addition, buy-side organisations have looked to grow out their Research functions across similar areas and will be looking to continue this into 2017. This is due to implications of MIFID II regulations which will see a reduction in sell-side research being utilised. Therefore, buy-side clients will be looking to organically grow out their Research functions; this has already been shown by a number of recent hires within the market.

Operational Risk

Q3 has seen the trend of firms bulking out first line functions continued. Increasingly these roles are being taken up by people who have strong product knowledge as well as an understanding of Risk & Control Self Assessments. As mentioned above, position across the second line are requiring candidates to have both a broad range of Risk experience and knowledge of ICAAP and other Treasury principals. Given regulatory pressure, we predict Operational Risk will continue to be busy in Q4 and beyond.

Quantitative Analytics

Quantitative analytics has seen a consistent rate of hiring across Q3. XVA in particular has seen significant investment over the past quarter and will continue to be an area of growth in Q4 and beyond. In general, Banks are looking for candidates with Pricing Model knowledge and object-oriented programming ability, as well as a strong knowledge of a particular asset class. From a buy-side perspective, firms are making greater investment in quantitative professionals to perform algorithmically based research to inform their investment strategies, particularly across Fixed Income asset class.

Investment/Market Risk

Given the abundance of hiring in Investment Risk in H1 firms have mostly not been hiring in this area in the last quarter. One trend becoming more apparent is the desire for Investment Risk professionals with Quantitative background and programming skills to perform research roles from a Multi-asset perspective. Market Risk Management hasn’t seen much new job flow over the last quarter, mainly due to lack of growth opportunities and increase regulation on existing employees. However, stress testing from both a Market and Liquidity perspective will continue to be a skill set in demand in the future.

Predictions

The requirements for contract and temporary recruitment have been varied over the last quarter, though most pertain to the regulatory pressures. In this quarter, there is usually demand for professionals which have extensive experience on dealing with ICAAP submissions and this year was no different, with many institutions requiring SME knowledge to achieve successful submissions.

Further to this, the IFRS9 regulation has become a focus for temporary recruitment, with many Investment Banks showing a large appetite to bring on specialists. From a candidate perspective, there is a wealth of contractors who have shown a real desire to work in IFRS9 teams due to rich vein of work that this regulation provides.

A similarly buoyant area of recruitment was Operational Risk and Quality Assurance. The main focus of this has been 2nd Line of Defence and Risk Framework definition and implementation. Positions in this space have been largely SME roles, rather than temporary cover which eludes that this is a key growth area across Financial Services.

It is difficult to predict the recruitment needs over the next quarter due to the complex nature of the past three quarters. However, due to the impending pressures including FRTB and IFRS9 we expect to an increase in the requirement of temporary assistance. A consideration to take into account is the cost cutting measures that have been rife over the past year, which in some cases have led to the appetite to hire fewer contractors and transition to longer term permanent hires.