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Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2020

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q1 2020

INTRODUCTION

Coming into the final weeks of the first quarter of 2020, writing this commentary was set to be a very easy and enjoyable task. The Credit, Risk and Quantitative Analytics team had had a great start to the year, completing a number of challenging mandates which had been held over from the end of Q4, and seeing an influx of highly attractive and newly created positions come into the market from a diverse range of financial services organisations. Brexit was “done”, the general election was conclusive, and the sun was shining (metaphorically if not literally).

 

If you are reading this, most likely in a home-working environment, you already know what happened next. It is pretty conclusive that we are now operating in the most challenging recruitment market since the financial crisis. Responses from firms to the current situation have been expectedly mixed; some have decided to pause recruitment indefinitely, while others are seeking to continue hiring processes using remote interview techniques. We are seeing that the clients who are being proactive with phone interviews and meeting candidates via video conference are those that are being successful attracting top talent.

 

Furthermore, having been forced outside of an office environment, candidates are in general more open to speaking with recruiters and hearing about opportunities given the increased privacy of working from home.

 

Overall, general advice on the market would be that if you are being approached about a role as a candidate in these times, it’s a business-critical hire, and therefore a chance to add genuine value to a firm. Longer notice periods are now being seen as a positive rather than an inconvenience, as on-boarding of identified talent continues to happen through remote means.

 

We are also seeing a number of firms guaranteeing bonuses where variable comp makes up a significant part of the package, to show that they are committed to the hire. Given these times of uncertainty and reduced job flow, there is also significant value at the moment in engaging agencies in retained searches and benchmarking services. We are told by senior hiring managers in our markets that whilst much recruitment is on pause currently, this is only a temporary measure, and that hiring will pick up significantly once things stabilise.

 

This has been a topsy-turvy quarter for the contract market.  At those firms who had set out clear procedures for the implementation of IR35, we saw no day rate contracts and instead FTCs. However, as the current crisis unfolded, job flow has fallen in the latter part of the quarter, as there is a more cautious market both on the client and candidate side. The government has decided to postpone the implementation of IR35 for a year as a result of the crisis, and those companies who have decided to delay their IR35 procedures now hold a strong competitive advantage over those that have not.

 

Finally, we have produced a salary survey this quarter, detailing average salaries and bonuses at different corporate levels for each of our specialist areas. If you would like to receive a copy, please do not hesitate to reach out to one of our consultants, details of which can be found in the contacts section.

INVESTMENT/MARKET RISK

The first quarter saw the advent of a number of regulatory-focused investment risk roles come to market at the mid/senior level. Knowledge of UCITS/AIFMD has been particularly sought after. We have seen that many firms are now expanding their product ranges to include alternative investments as well as the traditional asset classes, and this skillset attracts a significant premium in the market.

 

On the sell side, we are seeing a lot of firms move Senior Associate/AVP level talent into Market Risk from other functions, and senior leavers are being replaced through internal promotion/lateral moves, thus creating a quieter market than might have been anticipated at the start of the year.

 

OPERATIONAL RISK

A trend we have seen across buy side firms in Q1 is a demand for first line controls professionals who have strong investments product knowledge. This poacher-turned-gamekeeper skillset is one which we have seen firms go above and beyond to secure in the past few months.

 

INFORMATION SECURITY/TECHNOLOGY RISK

Information security continues to be a significant challenge for firms in Financial Services, and, given the increased reliance on remote working in the short/medium term at least, we are seeing an increased emphasis from firms on bringing in professionals with data security/protection experience.

 

One of the challenges businesses face as they look to bolster in this area is where to position these functions internally; some see this as a part of BAU risk management, whilst others see it as an issue for Legal and Compliance departments.

 

CREDIT

Candidates in credit analysis from a commodities background across all levels of seniority have been in high demand across Banking and Brokerage firms.

 

Across the sell side in general, we were seeing a number of candidates at the more senior end looking to change sectors/counterparty coverage, and willing to take reductions of a reasonable nature in compensation to do so.

 

Credit research continued in its renaissance from Q4 of 2019, and, consistent with the sell side analysts, commodities experience across energy and utilities was highly sought after. With the markets being volatile, we expect that firms on the right side of High Yield deals will see exceptional returns, and be in a strong position to grow in the coming months.

 

QUANTITATIVE ANALYTICS AND RESEARCH

On the sell side, Banks and Consultancies have increased their demand for candidates from an IMM/Counterparty Risk Analytics perspective, due to heightened demand from regulators. Most of the hiring has been at the AVP/Junior VP level, and candidates with these skillsets are often progressing with multiple processes at once. We also saw a significant increase in demand for Model Documentation professionals at the senior end of the market, in the wake of restructuring from a number of Tier One Investment Banks.

 

The buy side was once again busy across all asset classes for Quantitative Researchers, as a number of asset managers and hedge funds sought to expand existing functions at all levels of seniority. Particularly notable areas of demand were for junior analysts who have covered Multi-asset investments and senior analysts who have covered Fixed Income and Credit.

 

We are also seeing a heightened demand for quantitative professionals who have experience working with ESG data sets, and expect this to continue for the rest of 2020 given the demands placed on fund managers by investors who are looking to combine ethically sound investing with significant growth. In addition, buy side firms remain committed to hiring quants that have a mixture of Financial Mathematics and Computer Science experience.

 

Changes in attitude towards WFH

Another point worth highlighting is that with the vast majority of firms now advising that their employees work from home, Financial Services firms have been presented with the opportunity to re-evaluate their working from home policies moving forward. There is an ever increasing demand from employees to have the option to work from home at some point during the working week.

 

The current situation we find ourselves in may result in some firms, whether by choice or not, having the chance to confidently implement more flexible and well thought-out working from home policies. This may in turn result in these firms being able to attract more top talent due to better work-life balance,.

 

DIVERSITY IN RISK

Alongside our continued commitment to provide diverse shortlists, BRUIN has been instructed on a number of retained roles specifically seeking candidates from under represented groups, which is a positive reflection of our clients’ aspiration to increase diversity in their teams and the wider sector.

 

Later this year BRUIN is launching an ESG program to assist our clients, offering  events, workshops, and partnerships with Environmental Consultancies.  Sustainability and consideration of environmental, social and governance (ESG) factors, is a regulatory imperative and brings into focus data on how a company treats its workers, how it’s tackling the gender pay gap, its Diversity & Inclusion agenda, flexible working, the impact of its supply chain, on the mechanics of its governance, and how positive a role it plays within its community and to broader society. All of which will be key in navigating the new normal in the coming months.

 

If you would like to know more about how BRUIN are helping clients achieve access to diverse talent pools, please reach out to one of our consultants.

 

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For more information about the market or current opportunities please contact one of our Consultants.