Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2018

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2018

OVERVIEW

As the maelstrom of Q1’s bonus bonanza came to a close, we experienced a slight lull in the flow of new positions at the start of Q2 across Credit, Risk and Quantitative Analytics. However, this proved only to be a brief interlude, and overall as a team we have placed 100% more mandates this year compared to this time in 2017. Even accounting for our growth in headcount, this is a sign that the market is still buoyant in our respective sectors, and we maintain a positive outlook for H2 and beyond.

The spectre of Brexit continues to dominate conversations with both candidates and clients alike, and is expected to do so for the foreseeable future given that negotiations appear to be moving very slowly. It is becoming more commonplace for candidates to ask about the long-term plans for the geographical location of their roles moving forward, and firms are being asked to provide additional reassurance that the UK is where they will remain.

In addition to a summary of our respective areas of coverage, this commentary will also focus on BRUIN’s growing presence in the UK and Ireland, the recent recognition we have received for our diversity initiatives, an insight into counter-offers in the current market, and advice on how to keep processes from going stale over the summer.

 

ROLE PROFILES

Credit Risk

On the sell-side, the Counterparty Risk space has been particularly busy this quarter, with notable demand for candidates who have covered Structured Finance. Given the high density of candidates in this space, particularly those looking to transition from Ratings or Broking into Banking, we have found that clients in this space can afford to be very demanding in terms of what the candidate has covered. Corporate and FI coverage roles have had a steady flow in Q2, with NBFI positions continuing to take the lion’s share of the roles that come out externally.

In contrast with our other areas of coverage, Credit Research is a much more client-driven this year; the vast majority of permanent roles are being covered directly, with firms utilising their own networks in the space to fill positions.

Technology Risk / Cyber / Information Security

Information security has seen a high concentration of junior roles, as firms continue to take a top-down approach to building their functions in this area. The challenges have been around managing candidate expectations around what they can realistically achieve as a step up in responsibility in a new position. Many candidates at the mid/senior level are seeking the Holy Grail CISO position, and would rather move to a much smaller organisation in this capacity than move laterally into a similar-sized organisation for more money.

The Cyber Security sector has been exceptionally busy across the board, as firms seek to secure professionals who can protect against the Hydra-like threats to digital data. We have seen that candidates from Retail organisations are most in demand as these organisations are subject to more attacks of this nature than others. Firms are also willing to consider candidates from outside FS, specifically the pharmaceutical and technology sectors.

From a Technology risk perspective, the candidate market is still heavily weighted towards contracting as a preference, to the extent that candidates will leave permanent roles specifically to go into contracting. However, many firms are reluctant to take on a first time contractor, due to the time pressures involved in this work. Historically the Big 4 organisations have been at the forefront of the work in this field, but with changing regulatory demands firms are now being encouraged to build out their own permanent functions.

Operational Risk

In a reversal of the first quarter, across both the buy and sell side, Operational Risk has been relatively quiet in Q2. A combination of firms securing the hires needed in the first quarter, and the propensity for banking organisations to source these candidates directly, has meant that roles coming out to agency have been few and far between. As is now common, the second line of defence had the highest concentration of positions in the market, with large banks and asset managers looking to bring in candidates with frameworks experience.

Investment Risk

In line with Q1’s trend of firms seeking candidates with multi-asset experience, this quarter has seen the advent of a number of Senior Multi-Asset Investment Risk positions come to market at top-tier asset managers. In the majority of cases, these roles are reporting to the overall Head of Investment Risk, and sit as peers to Heads of Fixed Income and Equity Investment Risk. This allows for a more rigorous framework around each of the different asset classes, comprising of a First and Second line of defence. We are still seeing that candidates in this space are far more attracted to the first line positions than the second line ones.

Market Risk

After a relatively quiet start to the quarter, the end of Q2 saw multiple vacancies come out in Market Risk, both on an expansion and a replacement basis. Banks have tended to look to recruit at the VP/Director level, replacing individuals who have moved on to pastures new. One noticeable trend has been a lack of female candidates making applications for these positions at the senior end of the market. We are actively working with our clients to explore how these roles are presented externally, and advocating candidates from different backgrounds with the transferable skillsets to move into the MR space.

Quantitative Analysis and Research

Q2 has seen an influx of new Model Validation and Governance positions across Investment Banking, Consultancy and Fintech firms. In addition, a number of large Asset Managers are also hiring in this space, with prospective candidates being asked to cover the entire spectrum of models used in the investment decision making process. The challenge has been that these firms are ideally looking for individuals with commensurate buy-side experience, and given that Model Risk functions on the buy side are far less densely populated than on the sell side, the candidate pool is shallow. Furthermore, in terms of base compensation, AMs are a long way behind the Banking sector.

Following a similar trend to Investment Risk, Quantitative Research has had a high concentration of multi-asset based positions released in the past quarter. These have tended to be at the mid-level for the most part; direct experience with multi-asset has not necessarily been a pre-requisite for candidates, as long as proficiency has been demonstrated in either equity or fixed income quantitative research. Transaction Cost Analysis remains a highly sought after skillset, and firms continue to explore the potential of Data Science and Machine Learning expertise in their investment efforts.

Contractor Assignments             

As well as an abundance of contract positions in the Information Security sector, we have noted a proliferation of SMCR and GDPR-based roles across the mid-senior level of the market. We have also seen a number of junior/mid-level positions in the Operational Risk and Investment Risk spaces, usually as a result of attrition on the perm side. From a Quantitative Analysis perspective, it is not uncommon for searches for permanent positions to take up to 6 months at the senior end, given the general paucity of candidates and the lengths of notice candidates have on perm. We anticipate that the contract market will be slightly quieter from a BAU perspective.

Regional Recruitment

As part of our commitment to providing our clients with recruitment solutions in a post-Brexit world, BRUIN is pleased to announce it has entered into a new partnership with Ireland-based recruiter Barden, to provide high quality specialist recruitment services into the Irish financial services sector. This follows on from the success we have had in our Manchester office, who have been busy this quarter with roles across Operational Risk and Control, Data Analytics and Risk Change in the North West, and in the Midlands we have seen a number of clients looking to build out Risk Analytics teams across wholesale and retail credit, as well as compliance and regulatory analytics.

 

WOMEN IN RISK

At the end of Q2, BRUIN were privileged to be recognised at the Women in Finance Awards, celebrating achievements for women in the industry along with 800 other financial services professionals. BRUIN were awarded the ‘Recruiter of the Year’ category, which recognises the firm that has championed equal pay and diversity in financial recruitment. BRUIN was particularly commended for leading change in the industry and providing insightful counsel to help their clients achieve fair gender representation at every level. Our hard work and dedication to this important agenda will continue into Q3 and beyond.

This year, across Credit, Risk and Quantitative Analytics, we have a 53%/47% ratio of male/female candidates placed, compared with 58%/42% in H1 2017. Given the increase in the number of roles we have filled overall, we are pleased that the numbers are showing a slight improvement, and that our commitment to diverse shortlists for positions remains strong. As part of any client engagement, we speak to hiring managers and human resources professionals about ways to broaden the representation of women within their organizations, and how they plan to empower women to reach the senior levels within their organisations.

 

Counter Offers: Over the Counter?

In years gone by in Credit, Risk and Quantitative Analytics, a candidate resignation followed by a counter offer from their current employer was a clockwork occurrence for the vast majority of hiring processes. Firms fought hard to retain their existing talent, wheeling out such tried and tested warhorses as pay increases and promotion promises to persuade staff to stay.

This year however, we have seen that only 13% of candidates who have handed in their notice have been offered a buyback. There are a number of possible explanations for this: one theory is that employers are starting to view counters as merely delaying the inevitable departure of the employee. Statistics show that 80% of employees who take a counter offer end up departing the firm within 18 months.

Another possibility is that firms are using the opportunity of staff leaving to relocate the role they are vacating to a nearshore or offshore location to cut costs, while some say that this is a reflection of an acceptance that people are more likely to move jobs in this day and age due to the advent of job boards and social media exposing candidates to more opportunities.

Overall, whilst counter offers appear to be on the decline generally in our fields, they still represent a very real threat to hiring process completion. Our consultant team continue to advise clients and candidates alike on their pitfalls. If you have a query around anything counter-offer related, please feel free to reach out to a member of the team.

 

CONCLUSION

Following on from an exceptionally buoyant Q2, we expect the flow of new mandates to decrease at the start of Q3 over the summer holiday period. Organising interviews will prove to be more challenging than normal, with clients and candidates swapping interview chairs for deckchairs over the next few months.

To combat the potential of a process going stale in this time, we advise that, in situations where interviewers will be away for an extended period of time, catch-up calls and coffees are arranged for candidates in process who may be waiting for interviewers to return.

 

Overall we move into Q3 with a positive outlook on the market, and are looking forward to as productive a second half of the year as the first.