Credit & Risk Management


• Article by BRUIN Financial



As is often the case in Q3, the paths of firms trying to interview prospective candidates were beset on all sides by the holidays of hiring managers and candidates. It was common to see firms release new vacancies, at a similar volume to that of H1, only for the hiring managers for these vacancies to go on holiday just as candidates started to present themselves. This is nothing new for this time of year, but, as alluded to in previous editions of this commentary, we are now in a market where roles are being released consistently all year round, and having long gaps in interview processes can lead to candidates being lost.

One way in which firms can look to address this problem is to maintain process momentum by setting up informal meetings with other members of the business while decision makers are away. Not only does this give candidates a better sense of how they will fit into the business, but also shows that the firm is actively engaged in the hiring process even when decision makers are away.

On the whole Q3 was a busy time for the Credit, Risk and Quantitative Analytics desk at BRUIN, and the consistent levels of hiring activity have seen us bring in a dedicated Researcher to support our Consultants in attracting top talent to BRUIN clients. David Lewis holds a BSc in Environmental Economics & Environmental Management from the University of York. He has recently returned from South Korea where he spent a year teaching English in an Elementary School.


Credit Analysis and Research

From a sell-side Credit perspective, a significant increase in roles was seen in the Investment Banking space at Associate and AVP level in Q3. Banks overall sought candidates with Leveraged Finance Corporates or Financial Institutions experience. In H1, we found that these roles were mostly being sourced directly by firms, but with increased volume, agencies were engaged more frequently.

From a buy-side perspective, there was a drop-off in the volume of hiring to cover Emerging Markets, as most of this recruitment had been completed in H1. The spectre of MiFiD II continues to linger over the Credit Research world, and combined with a large number of M&A processes coming to a head meant that hiring in the space was curbed significantly in long-only houses in Q3. In the Hedge Fund space, US firms continued to hire specialists to cover Distressed Debt and Special Situations.

Information Security

FS Firms continued to amortise their Information Security teams in Q3, a trend which shows no sign of abating, as this high-profile topic continues to be high on the agenda. Sell and buy-side firms alike have hired at the mid-senior level, as these teams start to take shape. One challenge that firms have faced in hiring on a permanent basis is that the contract market is exceptionally buoyant for ISR professionals at the moment, and as such, much like how the Change market used to be, it is extremely difficult to persuade contractors to take a significant hit in remuneration for a permanent opportunity.

Operational Risk

On the sell-side, Q3 saw firms looking to strengthen existing established First Line teams by hiring junior/grad scheme rotation analysts. From a Second Line perspective, more hiring was seen at the senior end of the market. On the buy-side operational risk has undergone somewhat of a paradigm shift in Q3, with firms now seeming much more open to considering candidates from sell-side backgrounds, provided they have an understanding of the whole trade lifecycle and accompanying product knowledge.

Investment Risk

In Q3 we have seen a high volume of junior/mid-level roles across Asset Managers and Hedge Funds. Unlike their Operational Risk counterparts, Investment Risk teams remain keen to source professionals of commensurate experience from other Investment Risk teams. Reasons usually centre on being unable to train individuals on the job due to lack of available resources. This causes several difficulties in sourcing for these positions at all stages of the recruitment lifecycle: firstly the pool of suitable candidates is very shallow, secondly candidates will question the merit of sacrificing relationship capital to move to the same job at a different firm, and thirdly buy-backs (an automatic reflex in this market) are more likely to succeed.

One noticeable trend has been for Systematically-aligned firms to employ Quants into their Investment Risk functions, given the evermore technical nature of the positions. This practice has both benefits and drawbacks: on the one hand you will have someone who understands how to build, from first principles, a model to capture Risk effectively, but on the other hand you run the risk that once this has been completed and implemented, the day-to-day responsibilities are not academically stimulating enough to keep them interested in the role.

Market Risk

As alluded to in the Q2 Market Commentary, Market Risk did see an increase in activity at the senior level across the Investment Banking space, with firms looking to hire desk-facing and regulatory Market Risk professionals. Many of these roles were sourced direct to start with; however as the quarter progressed more and more positions came to agency. Candidates with knowledge of more than one core asset class were very much in demand. Consultancies also sought to hire within Market Risk to support regulatory projects around FRTB etc.

Quantitative Research

Over the course of Q3, it has become apparent that many firms who have previously made a mutually exclusive distinction between systematic and discretionary investment strategy are looking to shift towards a more balanced approach moving forward. “Quantamental” approaches to investment are starting to become more prevalent, with discretionary firms looking to recruit candidates with experience of systematic signal generation and portfolio optimisation research experience. This offers those candidates working in the now all-too-often over politicised large systematic firms the opportunity to utilise their skillsets to add genuine value to a new approach, and take the responsibility and reward on that approach. The challenge for the discretionary firms seeking these candidates will be matching the market-leading compensation afforded to candidates skilled enough to ply their trade in the top systematic funds.

Quantitative Risk
From an Investment Banking perspective, Q3 saw a fairly typical array of replacement roles across Validation, Governance and Methodology functions, typically at the AVP/VP level. One trend that became more prominent was for more junior candidates to be considered for senior level roles, and, at those banks where the corporate titles do not scan directly, the potential to receive external promotions is no longer completely out of the question for Quant candidates. This mirrors the difficulties in recruiting candidates at senior VP level, where candidates typically will be looking to make the step to Director in their current firms, and where candidates’ appetite to move often reflects lack of opportunity for this to happen in their current firm.

Regional Risk – UK
For the Regional Risk desk at BRUIN, significant volume hiring was seen from Investment Banks in the Retail Credit Risk space, from entry level to junior VP, as firms looked to strengthen their functions in line with ring-fencing policies. Towards the end of the quarter, it was common to see prospective candidates for these positions involved in three or more processes at the same time, and to be relatively flexible on location across the UK. This, combined with the added complexity of hiring managers being concentrated in London, made recruitment in this space a challenge. Q3 was also a busy time across Operational Risk at the junior level in the regions, with firms looking to grow their functions organically outside London.

BRUIN attended the PRMIA Women in Risk event on the 7th September at the offices of HSBC. An evening of stimulating discussion, facilitated by a panel of senior representatives from the Risk Management space, centred around the below topics:

  • How can a risk professional get noticed by the right people for the right reasons?
  • How can a new risk manager establish her authority?
  • How can she influence others?
  • What are the challenges faced by young women in particular and how can these be overcome?
  • What are good ways of managing conflict?

With preparations underway for Gender Pay Gap reporting in 2018 and tougher targets for Women on Boards set for 2020, there has never been greater pressure on the financial services sector to tackle the challenge of gender imbalance. With this in mind, BRUIN Financial have partnered with Women Ahead and The 30% Club to run a “Women Rising” event. For more information on this, please feel free to get in touch with one of our consultants.

As we move into Q4, it is absolutely imperative that both jobseekers and hiring firms approach their respective searches with bonus considerations clearly understood before embarking on processes. Candidates who are in employment and waiting for a bonus should not be dissuaded from seeking new employment at this time of year, given the length of time that permanent hiring processes take, and the potential opportunity cost associated with not applying for an opportunity that fits your aspirations well.

However, it must be recognised that firms are unlikely, in the most part, to offer 100% bonus buyouts, and as such going in to things with this expectation would be folly. Firms at this time of year must be sensible about the fact that, in the same way as bonus buyouts are unpalatable for them, it is equally unlikely that candidates will find the idea of walking away from a full years’ bonus with such a short time to go before announcement an equally unappetising proposition. Therefore firms must make a decision as to whether they are willing to offer some form of fiscal compensation for the candidate to trigger their notice immediately, or make a gentleman’s agreement with the candidate to wait until bonus has been paid before starting a resignation procedure.