Credit & Risk Management


• Article by BRUIN Financial


Market Overview
In the first quarter of 2016, Financial Services organisations have shown polarised attitudes towards hiring. From day one, it has been clear to see that if an FS firm is hiring, it is doing so in large volume and at fast pace, and if it is not, it is generally on a freeze/headcount reduction that shows no sign of abating. Hiring patterns at larger institutions have proved to be a reflection of both the overall strategy of the firm and their position with regard to existing headcount, whereas at smaller firms hiring has tended to be to replace lost staff. There is still a large degree of uncertainty in the global economic climate, which has caused many firms to delay their annual budget and headcount announcements, and therefore the slow and steady start predicted at the end of last year has proved to be more on the slow side.

Regarding compensation, research suggests that bonuses for the last financial year have been predicated towards the retention of top talent, and that employees who have received similar or larger bonuses to the previous year should consider themselves very much in favour

With seemingly endless regulatory pressure, it is no surprise that Governance and Regulatory SME roles continue to be key hires for many firms. It is becoming more and more of a trend to see people from technical, numerically-aligned backgrounds transcend to roles requiring strong communication and stakeholder management skills.

From a contracting perspective, there was not a huge amount of hiring over Q1 of 2016 but this begun to increase during the latter parts of the quarter. On the whole, Operational Risk within middle office functions focusing on the first line of defence has been the busiest area.

Due to a slow market and a large candidate pool, daily rates in the area have been relatively low in this area though, in more niche quantitative analytics roles daily rates have remained high.
Clarity on FRTB deadlines has allowed larger investment banks to plan more effectively on how to achieve set targets. For this reason, there has been more hiring on these work streams especially from a quantitative perspective.

Credit Risk/Analysis
Q1 has seen a steady influx of Credit Risk/Analysis roles. Ratings firms have been especially busy at the Analyst/Associate Director level where sector specialism has been a key determinant factor. Utilities/Transportation, Infrastructure and Leverage Finance have been particularly busy areas of hiring in the credit space. Due to the recent Oil crisis Credit candidates from Commodities houses have been prevalent in the market and looking to switch sectors to provide themselves with more stability.

Operational Risk
The majority of roles in this space have been in the junior – mid region (50-65k). Candidates with an audit and/or 2nd line of defence background have been heavily sought after. The roles have been a mix of replacement hires and smaller firms looking to bulk out their 2nd line of defence teams. Candidates with experience of carrying out risk assessments across various business divisions have been in demand

Investment Risk
Investment risk has remained a busy area with firms either looking to organically grow their risk teams due to an increase in AUM or to hire more junior candidates to undertake the more reporting / Data heavy responsibilities within the teams allowing the more senior members of the team to focus on actively managing risk within the firms portfolios. These roles have been seen across asset class but the majority still in the fixed income space which is generally seen as the most technical of asset classes to risk manage.

Market Risk
Consistent with years gone by, Market Risk Management has seen the advent of a number of replacement hires in Q1 across a range of asset classes. These roles are seeing an increased emphasis on regulatory responsibilities alongside the typical day-to-day risk management of the trading desk. Market Risk Analytics continues to be a growth area, despite the extension of the FRTB deadline. Firms are showing an increased inclination to outsource more junior level Market Risk Production roles to offshore locations to cut costs, but roles at the senior end are still prevalent. New roles centred on Volcker regulation and Stress Testing are expected to be abundant over the coming months.

Quantitative Analytics
Alongside the aforementioned growth in demand for Model Governance professionals, Q1 has seen a consistently high demand for Model Validators across all asset classes, with many firms looking to expand their Model Validation functions. Counterparty Credit Risk and CVA quants continue to be in high demand.

Given the scarce nature of professionals who will meet all of the pre-requisites for roles in the Quant space, and the general clamour from the candidate pool for new learning opportunities in a new role, the challenge for firms in the New Year will be to identify those candidates with the ability to adapt to new situations and responsibilities.

A notable challenge recruiting for positions in these areas is the propensity for candidates to want to move into the Front Office. The challenge these candidates will face is that, as well as the roles being few and far between, firms will look to move people internally to fill them. Candidates with designs on making this move who cannot do so internally will have more chance moving into a role more akin to their experience and moving internally later down the line.

Overall, we expect there to be an increase in the general appetite to hire across Financial Services in Q2. We are already seeing that firms whose hiring has been frozen over the last quarter have started to open the doors again, and this will only escalate post-bonus payments and headcount confirmations.

This is still very much a candidate-driven market, and there is no sign of this changing any time soon. It is still going to be commonplace that in-demand candidates will have multiple offers to weigh up at the end of processes. It is therefore going to remain crucial that firms act quickly and decisively to secure the best candidates.

With an increase in temporary requirements already becoming evident, I would suspect this trend to continue over Q2. Bonus season can lead to permanent employees leaving in this quarter, which are often filled in the interim by contractors.

FRTB will continue to be focus for the larger investment banks and in general, due to the temporary nature of the requirements, these will be filled by contractors or consultants.