Market Overview
INTRODUCTION
After a frantic start to the year in the Risk job market in Q1, Q2 saw the hiring pace pick up even further, with a quarter-on-quarter increase in job flow of 22% observed by our consultants. A number of contributing factors can be attributed to this rise; firstly an exponential increase in job flow from banks and other sell-side organisations, secondly a number of firms on the buy side looking to expand functions across Real Estate, Alternatives and Private Markets investment classes, and thirdly natural attrition post-bonus payouts.
Over the course of the first half of the year, it is undeniable that we have seen a paradigm shift in the hiring market from “client led” to “candidate led”. Last year, the vast majority of firms paused hiring in Q2 due to the pandemic, and those firms that were able to continue hiring had their pick of the candidate market. Now the competition for talent (often the same talent) is fierce, and candidates are able to command interest from multiple firms at the same time. This is how the market was before the start of the pandemic, so it’s great to see that things are starting to normalize.
It is important that firms recognize the shift back to a candidate-driven market, particularly when it comes to being competitive on compensation. We are not in a market where passive talent will move for a flat compensation package, and this must be factored into benchmarking practices. Often firms will have a solid idea of what a person is earning in a particular role, but fail to take into account the purchase premium of making new hires, and thus budgets will be prohibitive to securing passive talent.
Where firms can gain a significant edge in the battle for risk talent is through speed and efficiency of interview processes. We have observed a number of cases where interview processes are conducted in a segmented fashion (i.e. all first round interviews must be completed before 2nd rounds can begin and etcetera). This also extends to interview feedback, where candidates won’t get any on their interviews until all have been seen. In contrast, some interview processes are conducted dynamically, with candidates receiving feedback in a very short timeframe and progressed through the process rapidly if things go well without waiting for others.
In candidate-driven markets, firms will essentially incur a deadweight loss of talent if interview processes are inefficient. Candidates in the Risk sector are simply not going to stand on ceremony waiting for all their interviews to conclude, as this gives a perception of disinterest to those firms that have gone the extra mile to facilitate a quick process, and could potentially jeopardize offers. We strongly recommend to all our clients to keep this in mind when searching for Risk talent.
Finally, conversations are taking place across the industry about plans to return staff to the physical office after pandemic restrictions end. From the perspective of our team, we will be adopting a flexible working policy mixing both office and remote working, tailored to the specific needs of our team members. As a team we are in constant conversation with clients on this issue; should you have any queries on this topic please feel free to reach out to one of our consultants.
Buy Side Risk
Over the past quarter, we have seen many buyside firms expanding their alternatives businesses. This has brought the advent of multiple roles across investment risk, where candidates with infrastructure, real estate, private debt and private equity knowledge are in demand. The challenge with these roles is that these areas are very specialist and niche, and candidates with this experience are extremely rare. In order to fill these roles, clients need to be flexible on their requirements and be creative in terms of the backgrounds these candidates can come from. A lot of candidates with experience in these areas traditionally work in investments on the deal side, and not in risk management, and therefore this move does not necessarily appeal in the majority of cases.
From an operational risk perspective, Q2 has seen a number of newly-created “business partner” roles come to market. These positions have typically been sat between the first and second lines of defence, requiring candidates to have responsibility across both first line controls and second line strategy. The key challenge in sourcing for these positions has been ascertaining the balance sought by the clients on candidate experience within the operational risk function between FO controls and 2LOD frameworks.
Sell Side Risk
On the sell side, we have witnessed a significant number of banks making hires into liquidity risk functions in the last quarter. Many of the larger banking organisations are restructuring the way they approach liquidity risk from a second line perspective, and this has lead to a number of growth hires being made. Typically candidates have been sought at the mid/senior end, and those who have worked across first line teams across the liquidity spectrum have been in particular demand. On the traded risk side, hiring has been mainly concentrated in the regulatory domain, with candidates in demand to work on FRTB/IBOR/Trading book wind down and various other projects, both on a permanent and in some cases long-term contract basis.
We have also observed a number of senior hires being made within operational resilience and product governance in banking organisations. Candidates who come from audit backgrounds have been seen as desirable for these. Also, further to the previous quarter, climate risk proved to be an area of significant desire to expand for many sell side organisations.
Diversity in Risk
In the last quarter, we have seen a number of financial services organisations adopt a practice of “blind hiring” when recruiting for roles in Risk management. The principle is based on a logical reasoning: the only criteria that should impact the hiring process are skills and knowledge related to the role, and the rest is noise. However, the practice needs to go further than just anonymising CVs for hiring manager review.
Firms should be conscious of gender coded language in job specs and advertisements, and also of running a uniform interview process with the same questions asked of all candidates in the same order, regardless of experience level. Furthermore, there needs to be an objective, data-based system in place on existing employee performance so that successful candidates at interview can be assessed fairly relative to their peers.
For more information on how Bruin can help your firm to facilitate a successful blind interview process, please reach out to one of our consultants or visit our website for more information.