Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2018

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2018

OVERVIEW
Q1 has been an extremely strong start to 2018 in the Credit, Risk and Quantitative Analytics recruitment space, with client requirements increasing more than 50% by comparison to Q1 2017, over what is often one of the quieter periods of the year. It is also encouraging to note that many of these roles are as a result of positive change at our clients’ organisations, such as growth plans, or replacement hires for internal moves.

The Risk team at BRUIN, similarly, has grown significantly over the last 12 months and is most recently joined by Amy Brown. Amy will be assisting on candidate research within the Credit, Investment Risk and Quantitative Analytics spaces, as well as developing our offerings across Continental Europe. Amy holds a First Class Honours degree from the University of West London.

Bonuses
The results of our 2018 bonus satisfaction survey indicated that the cash amounts themselves in a vacuum aren’t the real determinant of bonus satisfaction; and that satisfaction levels differed significantly depending on how long candidates had been at a certain level.

We found that junior candidates, likely receiving their first or second bonus, were overwhelmingly satisfied or very satisfied with their figure; and that this trend continued for mid/senior level candidates receiving perhaps their first bonuses at a higher corporate grade. However, for candidates who have been at the same level for a number of years, satisfaction levels were significantly lower, with a far larger proportion reporting disappointment.

Solutions to safeguard against potential employee dissatisfaction at bonus time can be found on both the employer and employee sides of the coin. Employers who are transparent about bonus schemes, and have percentages or figures outlined in writing for these, are in our experience less likely to face issues at announcement time. Similarly, employees should feel encouraged to discuss the variable element of their compensation, and it’s prospective size/eligibility criteria, with their managers to avoid mismanaged expectations.

ROLE PROFILES

Market Risk
Q1 saw a significant amount of movement within Market Risk Management across asset classes, particularly looking at structured and hybrid products, as well as roles created to respond to changes in regulations within VaR reporting post-

Brexit. With many banking organisations moving their Risk and Finance functions closer together as a result of FRTB, we are now seeing an increased number of candidates coming from Product Control who are required to have knowledge of Market Risk Metrics. Given how difficult it can be to move experienced Market Risk Managers into another role covering the same asset class, Banks are increasingly more open to candidates who have the relevant product knowledge from PC backgrounds.

Q1 also saw a number of brokerages making hires with candidates requiring a rounded experience across Market Risk Management and Reporting to secure mid/senior level roles in lean functions.

Quantitative Analytics
From a sell-side perspective, by far the biggest area of demand for candidates has been in the Pricing space. Candidates with experience validating pricing models across asset classes (particularly rates), who have strong derivatives and stochastic calculus knowledge, have had access to an abundance of potential job opportunities in this Quarter. Of course, as is often the case in this space, like-for-like moves are extremely difficult to facilitate due to a scarcity of talent in the UK and a desire for candidates to move into a different area of analytics altogether.

Model Governance has also been a busy area, with a number of the so-called “Tier 2” banks, Asset Managers and Corporate Banks growing their existing functions. Candidates have been expected to deal with a wide variety of model types, and those from larger institutions have often struggled to convince these firms that they have the breadth of model coverage to convincingly lead a governance process.

Quantitative Research
The fight for top talent in Quantitative Research was intense in Q1, particularly in the Systematic Equities space focusing on Alpha Generation. It was not uncommon to see top talent receiving offers from a large numbers of firms at the same time, reinforcing the importance of swift and engaging interview processes in this field.

Towards the end of the Quarter, there was a spike in demand for Fixed Income Quantitative Researchers, with leading Hedge Funds, Asset Managers and Insurance Firms seeking candidates with either direct commensurate buy-side experience, or Front Office Quants from Investment Banks. Overall, given the scarcity of good candidates in this field, searches tend to be performed on a global scale.

Credit Risk / Research
From a sell side perspective, Credit has been relatively quiet in Q1, with most hiring coming as a result of attrition. FI experience, specifically European Banking portfolio coverage, has been in high demand. From an analytics perspective, firms continued to hire junior statistical modellers to look at PD and LGD models from a development, validation and governance perspective. From a Credit Research perspective, buy-side organisations are still adapting to life post MiFID, creating uncertainly as to how the market will look going forward. As has traditionally been the case, sell side professionals are still very keen to make the switch to Asset Management to be closer to Investment.

Operational Risk
From a buy-side perspective, Operational Risk has been extremely busy across all levels, especially Senior Risk Manager. Firms have understood that this skillset is sought after and the market is buoyant and are adjusting budgets to accommodate good Operational Risk professionals as a result.

From a sell side perspective, Operational Risk was busy at VP level, with Banks looking to hire candidates with experience designing and implementing frameworks. Where there is a stark difference across the buy and sell side in this field is that there are an abundance of candidates actively looking at the senior level on the sell-side, but very few roles coming to market, which is pretty much the opposite of the buy side. We are noticing an increasing propensity for banking clients to take up to 4 weeks to source internal and direct external candidates for roles, so perhaps Q2 will see a domino effect of senior candidate movement on the sell side post bonus pay-outs.

Investment Risk
Investment Risk has been extremely buoyant across all asset classes in Q1, with roles ranging from analyst up to ‘Head of’ level. Multi Asset product knowledge and alternatives seems to be a skillset in demand, with firms keen to diversify their product offering to clients and differentiate themselves from their competition. Again, there are plenty of roles and therefore good candidates have an abundance of choice, meaning firms need to compete to get these professionals on board. With the separation of the first and second line functions, roles are becoming available to beef these teams out. Candidates are seemingly more attracted to roles in the first line as this can offer closer exposure to the Front Office, where key investment decisions are made.

Quantitative Analytics
On the sell side, the Quant space saw increased demand for candidates from a statistical modelling background that have looked at models pertaining to Economic Capital and Stress Testing. We have also seen an increase in demand for candidates with strong knowledge of Stochastic and Ito Calculus.

We have seen over the course of this Quarter that many large organisations looked to build or supplement existing functions outside of London in 2018; be that in the UK Regions or beyond. Our UK Regional desk has worked with some of the larger banking organisations in 2017, and we have also worked mandates in Continental Europe in Q4.

Contractors / Temporary Assignments 
Operational Risk remained a focus for employers both in Banking and Asset Management. Control Frameworks, RCSAs and Governance were the sought after skillsets for the first quarter. Notably, there was a lot of cross over from Compliance to Operational Risk particularly in junior positions.

Quantitative Risk and Model Validation continue to be areas of high demand, with contractors being able to command exceptionally high rates due to the niche nature of skillsets required to do the roles, and the aforementioned difficulties of filling them from a permanent perspective.
Technology risk and Information security are understandably areas that are expanding rapidly as firms seek to streamline processes and comply with regulatory demands. Both Banks and Asset Managers have been open to seeing candidates from outside Financial Services who may have worked with start ups, digital firms and pharmaceutical companies, as this is where the highest concentration of talent sits currently. There is currently a shortage of candidates with specific knowledge in data gathering & storage in Financial Services.

WOMEN IN RISK
Q1 of 2018 saw a number of Financial Services firms publish their Gender Pay Gap reports, and so for this edition of Women in Risk we will look at the overall findings of these reports, and how firms are looking to address the issues they raise going forward.

One prevalent conclusion to come out of the reports is that firms are rewarding equal work with equal pay, and that there is no weighting on salary, positive or negative, based on gender. They key issue, felt particularly acutely in Risk and Quantitative Analytics, is the lower representation of women in leadership roles and roles of a revenue generating nature. This imbalance means that the mean gender pay gap across the companies will be high, as there are fewer women in roles which attract higher bonuses.

New measures are being mooted to increase the representation of Women in senior roles, one of which is refining the recruitment processes for all roles to produce diverse shortlists. BRUIN’s Consultants are all trained in recognising Unconscious Bias, and run similar workshops for our clients, more information on which can be provided by one of our Consultants.

Information Security – Join us for Breakfast

In June our team will be hosting a Breakfast Seminar on Data Deletion and Cloud Data Storage. We have a Regional Head of Data Management for an Investment Bank speaking on the topic, followed by some discussion around the issues that face Financial Services firms in this space (Chatham House Rules apply). If you work in this space, or feel that your firm could benefit from listening to industry experts on the topic, please feel free to reach out to one of us to discuss further.