Insights

Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2019

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q2 2019

OVERVIEW

As the second quarter of 2019 draws to a close, we have seen year-on-year new job flow compared to this time in 2018 remain  stable. Considering the challenging geopolitical climate, and the pending implementation of IR35, we see this as a sign that the job market in our verticals is relatively healthy overall, both in the UK and in Europe. Continuing on from the previous quarter, the senior end of the job market (particularly Director level equivalent and above) has been affected the most by these issues, with firms hesitant to create or backfill roles at significant capital outlay until they know where the UK stands post-Brexit. With this not expected to be clarified until the middle of Q4 at the earliest, this trend looks set to continue into Q3. As part of our commitment to providing real-time intelligence on the Risk market, and to provide a marketplace of ideas for Risk professionals to engage in, we have committed to setting up a private Risk Forum group on LinkedIn, which all are welcome to participate in and can be found HERE.

 

ROLE PROFILES

Market Risk

Hiring in London within Market Risk slowed in the second quarter in London. Where there was demand, it was for desk facing Market Risk Managers focusing on the fixed income asset class at AVP and VP levels. Firms on the whole seem to be more inclined to look to fill these positions through internal mobility, as candidates who work in the firm already will have a good understanding of the types of products they trade, which often proves to be the sticking point in hiring external candidates. By contrast, the Market Risk market in Europe is picking up, particularly in Paris and Frankfurt. Where banks are looking to set up new entities in these cities, the compensation ecosystem is experiencing shockwaves, as previous salary non-competes are being cast asunder by new players in the market. This is an excellent time to explore Market Risk opportunities on the continent, so please reach out to one of our Consultants for more information.

 

Investment Risk

Investment Risk on the buy side continues to be busy in the second quarter, with firms segregating and bulking out 1st line (Risk teams embedded in investments working closely with PM’s) and 2nd line (independent oversight functions) teams. With traditional asset class performance not yielding spectacular returns, firms seem to be focussing on multi asset strategies as well as alternatives (PE, Infra, Real Estate). Risk managers therefore with this type of niche product knowledge, although hard to find, have been highly sought after.

 

Operational Risk

Operational Risk on the buy side has been a little quieter in comparison to the previous quarter, mainly due to a distinct lack of churn in 2nd line functions. Where both buy and sell-side firms are interested in bulking out, on both a temporary and permanent basis, is in ‘rRisk assurance/internal controls’, which could be described as the 2.5th line of defence. Candidates from internal audit backgrounds often fit the bill for these types of positions, which are seen as appealing for those looking to move into risk as opposed to remaining in pure internal audit roles. The “Head of” level in Operational Risk has been fairly buoyant, with smaller buy side firms being told by regulators that this is a requirement and if they don’t already have someone in this role then they need to. Therefore, we have been able to complete some mandates at this level.

 

Credit

The market for Credit professionals has been relatively quiet over the second quarter. Where demand was seen, it was in the broker/dealer arms of the larger investment banks, with candidates from Analyst through to VP level sought. Candidates in this space are required to have a broad range of product knowledge. From a European perspective, we are seeing a lot more Credit Analyst roles appearing in Paris and Luxembourg, with a focus on the commodities asset class. Similarly to the Investment Risk space, candidates with Real Estate exposure also remain in high demand in the Credit space.

 

IT Risk / Cyber Security

Both in London and in the UK Regions, there has been an increase in IT Risk and IT Assurance recruitment in the second quarter, with Fintechs, Investment and Challenger banks, as well as the Big 4 looking to build out teams.  As a result, the Institute of Risk Management is going to support businesses and Risk professionals in understanding and managing the cybersecurity landscape, which is complex in nature.  Recruitment within IT Risk & Assurance is unlikely to slow down moving into the second half of the year, as hiring demand appears impervious to geopolitical uncertainty.

 

Quantitative Analytics and Research

The second quarter saw a spike in demand for professionals with Algorithmic Trading experience, particularly those who have worked in High Frequency Trading, as Prop Traders, Hedge Funds and IBs were hiring in abundance in this space. Candidates were sought for roles which had a wide range of responsibilities, including the origination and back testing of new strategies, oversight of the execution and cost analysis of these strategies, as well as model development and validation.

Fixed Income product knowledge continues to be in high demand, as does the capability to speak to both technical and non-technical stakeholders. Shortlisting from a diversity perspective continues to be a challenge in this vertical; however, across a broad range of roles and client types, there has been a consistent 70/30 male/female ratio of candidates shortlisted for these roles by us. The Diversity section below will discuss further some of the approaches we are taking towards making this a more even split.

 

Data Science

If at some point in the second quarter you’ve had even the briefest inclination to explore a quantitative job externally, it’s overwhelmingly likely that you’ll have found a Data Science job being advertised by a Financial Services firm! Traditionally, data scientist habitats have included FinTech, media and technology firms, but over 2019 we have been mandated by asset managers, hedge funds, banks and ratings agencies on data science roles. Naturally, with all of this, management consultancies are also hiring Data Scientists as part of their offering to clients.

Data science functions in the latter types of firms tend to be quite polarised, often with a “Head of” supported by a number of talented juniors. Where Quant functions exist in firms that are hiring data scientists, it will be interesting to see how they develop in parallel; not only in terms of responsibility split, but also in terms of internal competition for talent. One thing is for sure, hiring in this space is going to continue in abundance in Q3 and beyond!

 

DIVERSITY IN RISK

For this quarter’s edition of diversity in Risk, we wanted to shed some light on the challenges faced by our desk in terms of providing gender diverse shortlists for mandates, and how BRUIN consultants are adapting their approaches to these. Based on data gathered across our recruitment verticals over the past 4 years, we have found that, on average, it requires around four times the number of approaches to procure the CV of a female candidate for a position compared to a male candidate. Based on this, as well as qualitative feedback to approaches where available (i.e. where a reason was given for declining the approach), we have identified a key reason as to why this might be the case.

On average, women are more likely to look at a job specification and place more weight on the requirements they don’t fulfil, whereas men will be more inclined to overemphasise the criteria they do fulfil and ignore the ones they don’t. This psychological phenomenon, a variation of the Dunning-Kruger effect, means that it’s more likely that any individual approach to a male candidate will yield their CV as opposed to a female candidate. With the above in mind, and considering the generally risk-averse nature of candidates in the Risk sector (an irony never lost here!), it’s important that our consultants are guiding clients on writing job specs that are less likely to discourage a diverse range of applicants. One potential fix is to be more concise about experience requirements to lower the chances of subconscious disqualification. Another is to look at the language used in job specifications to gauge tone; BRUIN’s Gender Advert Decoder is one such way of doing this.

 

Please feel free to contact one of our consultants to discuss our work around Diversity in Risk further.