Credit & Risk Management

Credit & Risk Management Market Commentary, Q1 2014

• Article by BRUIN Financial

Credit & Risk Management Market Commentary, Q1 2014

Market Overview

Despite usual trends at this time of year, Q4 of 2013 was incredibly consistent. We usually feel the strain of year end, budget predictions and candidates holding out for bonuses which impacts hiring, particularly in December/January.

However, the past quarter has remained stable and the desire to hire is ever present. Clients appeared keen to hire good candidates before year end for the fear of missing out.

There appears to be a shift in the current market place. In recent times, Clients have been able to make very specific demands in terms of relevant experience, product knowledge, and institutional background as candidates were a plenty. Often, if a candidate wasn’t doing exactly the same role, at a competitor, earning less money they would rarely even gain an interview. Nowadays the candidate pool is a lot narrower, mainly due to a drop in the volatility in the current job market.

People in financial services are no longer at as much risk of redundancy and as a result aren’t in as much hurry to look elsewhere. This is not to mention the fact that many are awaiting a bonus come March/April time. Therefore, clients are being required to be more flexible in their demands.

Most notably, we saw an approximate average of 15-20% salary uplift for Risk placements in 2013. This reveals the need for talent (both technically and interpersonally) within the market. Candidates are gaining large increases in their basic salaries when moving for new roles. This is undoubtedly linked to high levels of not only multiple offers from potential firms, but also guaranteed counter-offers. In 2013, salary has played a significant part in securing top talent. We have no doubt this will continue throughout 2014.

Role Profiles
Role profiles have, generally speaking, been very niche, as there is a great distinction not only between areas within a risk team but even within each subsection of a risk team (market, credit, operational). It is very rare that candidates will make the transition from one area of risk to another but also from one product e.g. equities into another e.g. fixed income or from one type of institution e.g. corporate banking to another e.g asset management. Consequently, roles have an increasingly narrow focus, of which there is a shortage of candidates who have carried out the specific role previously. For example, the top tier investment banks are currently looking for operational risk experts to cover and oversee particular business areas in a first line of defence type of role. Candidates will usually sit in a far more centralized operational risk function, and those who are doing a similar role elsewhere often see it as a very sideways step unless a significant step up in salary or corporate title is on offer. Our ability to headhunt from clients that we do not work with has enabled us to target candidates at competitors of our clients, who are not active in the market.

The market risk and quantitative space has continued to be a difficult area to recruit for. With niche new products and/or business areas to cover, it is rare that any two teams are structured in the same way. Clients want to see candidates that are not only sound technically and have extensive relevant product understanding but also have very good interpersonal skills. In this technical type of role, candidates with this dual skillset are often a rare-breed.

In Asset Management, there was and continues to be, ongoing demand for investment risk experts. Predominantly in the Fixed Income space to monitor and analyse the performance and risk of this increased type of portfolio.

To comply with new regulations, we are also seeing a need for good buyside operational risk candidates within smaller asset managers. Often at these smaller houses one person is solely responsible for operational risk/compliance & audit.

The FCA have deemed it necessary for these 3 areas to split so standalone operational risk roles have become open and we were particularly busy sourcing this type of candidate in 2013.

Contract Market
The current economic outlook and the globalisation of regulation across the FS industry is stretching institutions to meet multiple regulatory demands with limited resources and within considerably tight timeframes. The result has shaped the focus of hiring across the market for regulatory and risk functions. Modest budget allocations were prioritised for “critical hires” or regulatory projects for Q1 2013 but the economy eased moderately throughout Q2 and Q3 and we saw a steady increase in volumes across the board for contracting with areas such as risk modelling and methodology, particularly focused on economic capital, experiencing a buoyant market continuing through to Q4.

The banks are adapting to the market in the contracting space and using a direct approach to recruitment with agencies being used on more niche and specialist roles that onsite providers don’t have the resources to service.

What activity is happening in the contract market?
The market is heavily recruiting across the contract market for regulatory focused positions. We have seen an increasing and ongoing demand for candidates across specific regulatory programmes; Basel 3; Risk infrastructure, liquidity reporting, LCR, counterparty credit risk; market risk modelling and methodology and Economic Capital.

The current market has required agencies to adapt quickly to client needs and specialised roles have become a big driver to add value. Areas where the contract market has seen and continues to see seeing volumes are through large programmes of change where recruitment levels are too large for onsite teams to deliver independently of agencies. The main examples of such programmes across the industry in the UK, and in some programmes globally, has been regulatory focused with projects including Basel 3 implementation, Dodd Frank, Reference Data/Client Clearing and impacts on other areas; Client Money; Transaction Reporting; AIFMD; RDR and as a result of these programmes the business areas that are recruiting heavily are change, compliance and risk all seeking specific skillsets in correlation to the regulatory impacts on each function and infrastructure changes required to ensure deadlines are met, reputational damage and fines are avoided. Clients aim to be ahead of the curve when it comes to regulation and we are seeing a much more proactive approach to regulation and the recruitment market has certainly demonstrated this shift in 2013 and we are seeing this continue throughout 2014.

We have continued to see comparatively low volumes across junior BAU functions in risk with these functions being predominantly being off and near shored with banks focusing on relocating support functions to locations outside of London.

The Risk Candidate
There is a strong demand for candidates who have a holistic view of risk and a wider perception of the regulatory impact across all areas of risk, are technically strong in product knowledge, risk methodologies and systems. Strong risk candidates are evolving with the demands of the changing regulatory landscape and candidates who can demonstrate strong interpersonal skills, coupled with technical risk knowledge, are in high demand. More is expected from prospective candidates as the risk function itself continues to grow in significance. There is little or no flexibility on systems skills with the focus of the banks being on implementation and infrastructural changes to transform the way they conduct risk management as a whole.

The Projects and Change Market
Within this area demand is already high in 2014. We are seeing an increasing number of roles across market, credit and operational risk. In market risk, the demand has been for both BA’s and PM’s with strong modelling and data skills.

Market risk has always been an area where candidates have strong IT skills but this has become more pronounced in recent times, probably due to a number of banks merging their business and IT change areas into one to realise efficiencies.

In credit risk roles have been fewer so far the ones we have seen have focused around counterparty and EPE needs. In the operational risk space we are seeing a trend for people with a mix of risk and control skills. A number of the requirements in this area are centred around un-authorised trading or mis-selling projects. As with the BAU roles; risk and regulatory requirements seem to come hand in hand and candidates with this mix are in hot demand.

Predictions for 2014
Recruitment volumes have continued to increase throughout Q1 and budgets are looking positive for Q2 2014. Of the banks doing global programmes recruitment is looking to remain consistent throughout H1 2014 at least.

In terms of trends going forward 2014 will potentially see a drop off in permanent recruitment levels for early Q1 to allow for bonus rounds. There has been an indication across the board from clients that 2014 will be steady, with all Tier 1 banks predicting continued resource requirements across risk implementation programmes.

Salary Rates
The market is extremely candidate driven, and with the increase in demand for high quality risk professionals, particularly those with knowledge of niche regulations and strong technical skills. The contract market is buoyant across temporary hires but salary rates across risk have remained steady. Although rates have not seen a knee jerk reaction to the regulatory demand for risk professionals, clients are willing and able to move quickly to offer on strong candidates but are often faced with competitive counter offers to retain candidates.

Overall, there continues to be positive signs for growth in recruitment and the demand for specialised candidates across risk with BRUIN remaining focused on an added value approach with our partnerships across the banking sector.

Predictions for Q2 2014
With the first two months of 2014 already off to a booming start, we have no doubt that this pure volume of recruitment will only increase over the next couple of months. With bonus payouts already happening, we have seen an increase in applications and a desire to move and see what other firms are offering.

Due to the competitive nature of the market, and the niche skillsets sought in the risk management space, we advise all of our clients to move quickly throughout the interview and offer process once a preferred candidate has been identified.

Candidates often have multiple offers and inevitably candidates are likely to receive counter-offers from their existing firms. Therefore, it is essential that throughout the recruitment process clients look to sell the opportunity to the potential candidate to ensure buy-in and secure them.

All of our clients have a need for risk management professionals currently and due to the niche skillset required – staff internally will not necessarily be able to make the transition into risk. There will therefore be a continued need to use specialist external agencies with a strong network and headhunting capacity. With the economy turning, there is a definite need for strong risk management professionals to prevent any further economic crisis and to mitigate these risks whether it be market, credit, or operationally related.

The FCA will gather strength in the coming year and firms will need to be best placed to not only react to new regulation, but ensure their firm is protected from all aspects of legislation and that risk teams are sufficiently covered. Consequently, risk management will continue to be a focus for recruitment at high levels over the next quarter and beyond.