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Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2018

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2018

2018 has been a very successful year overall for the Credit, Risk and Quantitative Analytics desk at BRUIN. We have this year grown as a desk and have made 19% more placements year-on-year compared to last year. Two of our consultants have achieved promotions in 2018, and we are optimistic that we will be able to emulate this success into 2019 as we explore new areas of potential growth.

Given the current state of uncertainty, and indeed elements of pantomime, around Theresa May’s EU withdrawal agreement, and the overall year-on-year reduction in job flow on our desk in Q4, it would be easy for us to take a negative tone in this commentary about the current state of the market. However, given that the majority of the positions taken on have been growth hires, both in London and on the Continent, we are seeing that firms are still committed to expanding even in the uncertain geopolitical climate.

As is always the case in Q4, bonuses played a big part in hiring conversations, and meant that senior end hiring in most FS institutions took a back seat. Consequently, mandates taken on commanding Director level or above corporate titles dropped from 25% to 15% from Q3 to Q4, and of those hires, the majority are set to be completed after the Q1 bonus run. Q4 remains a good time for junior and mid-level candidates to explore the market. Hiring firms are often able to offer higher-than-average increases on base salary at these levels, to compensate candidates for walking away from variable compensation. This is especially true where variable remuneration does not represent a large proportion of candidate total comp.

Moving into 2019, we expect business as usual for the most part for attrition hires, and new headcount as budgets are finalised. Clearly the 29th March will be a historic day for the UK, and it’s difficult to say what will happen beyond that at the time of writing, but we are feeling positive overall that our verticals will continue to flourish as they have this year.

 

ROLE PROFILES

Market Risk

From an Investment Banking perspective, the majority of firms completed their hiring in the Market Risk space earlier in the year, so things were relatively quiet in Q4. Where there was hiring, Fixed Income and Credit product knowledge proved to be the most in demand asset class knowledge. On the Continent things were busier, as IBs continued to plan for life after Brexit by building out new functions and amortising existing ones.

Q4 saw a number of Brokerages make growth hires in the Market Risk space, requiring candidates with exceptional Quantitative proficiency, and an understanding of how Market Risk is measured across multiple asset classes. These roles ranged from juniors to senior VPs, and often the delineating factor in candidate selection has been the IT proficiency rather than the financial markets knowledge, which is a change from previous cases.

Quantitative Analytics / Research

As with Market Risk, from an asset class perspective Fixed Income proved to be the skillset most in demand in Q4 in the Quant space, with IBs, Asset Managers and Hedge Funds all looking to strengthen their functions in this space. Moving into the New Year, we expect candidates with Global Macro experience to be in high demand across the industry, and a number of Equity Quant Research positions to come to Market in IBs and Hedge Funds.

One area of heightened activity in the New Year  may be for Hedge Funds looking to hire quantitative professionals with strong IMM/Collateral knowledge. Changes to regulation mean that Hedge Funds now have to take capital requirements into greater consideration when making investment decisions, and we anticipate that this will give candidates from Banking and Clearing the chance to showcase their knowledge of margin calculations in the Hedge Fund world.

Investment Risk

The Investment Risk space saw the majority of clients complete their BAU hiring in H1, and as such the market was quieter in Q4 from this perspective. Where hiring did take place, they were very much regulatory focused, and often based in Continental Europe (Luxembourg in particular has been a fertile ground for these positions). We have enjoyed sustained success placing roles of this nature, and hope to see this continue in the New Year.

Roles that did come up in London tended to be junior positions, supporting the heads of the function from a Risk Framework perspective. It has been challenging recruiting for these roles, given that the experience clients have sought and the salaries on offer have not been congruous.

Moving into 2019, we anticipate that the Multi-asset/Alternatives space will continue to grow with a number of firms looking to hire strong professionals in the Pensions/LDI space. We also expect that a number of blue-chip hedge funds will build out their functions in London, seeking either senior risk managers from other hedge funds, or from top-tier banks at D/MD level.

Credit Risk

Firms across the sell side have increasingly sought to bring on Counterparty Credit Risk specialists, particularly those who look at CCPs and Securitised products. Candidates who look at NBFIs have been in similarly high demand, particularly at the senior AVP/junior VP level. We anticipate this demand to continue in Q1.

Operational Risk

The bulk of the requirements have been at the mid/senior level on the second line of defence, within both buy and sell side organisations. Some firms have sought to grow out their Operational Risk second line functions, whilst others have looked internally to transition people across. Similar to other areas of Risk, Europe has been busy with a number of our large banking clients looking to France and the Benelux region to house their functions moving forward. We have seen that Operational Resilience is becoming a more pertinent priority for many firms, and we expect this to continue in Q1 next year, bringing new roles into the market as a result.

Information Security

Nearly all of the Information Security roles we have been mandated on this quarter have been 2nd line positions. Information Security departments vary from firm to firm in terms of where they sit within the business; a number of larger organisations have a separate Cyber Security function altogether, whereas smaller firms tend to have their security function sat within IT/Technology, Operational Risk, or in some cases Financial Crime.

Increasingly, there seems to be demand for candidates with broader skillsets to sit in roles which cover slightly different areas such as a ‘Data Protection Risk Manager’ or ‘Information Security Project Manager”. Data protection roles such as this have been more prominent in the market this year, as firms look to ensure compliance with GDPR. Despite the current climate, we are expecting to see lots of activity in Q1 and beyond next year, as Information Security remains a top priority for firms.

The market is currently candidate driven, with top tier candidates receiving multiple offers, which has lead some firms to increase their budgets in order to secure the best talent. Many of the best junior candidates (often at the Big 4) require visa sponsorship and he current climate has made the UK a less attractive prospect to international candidates, which has further diminished the candidate pool.  We’ve also seen that EU candidates currently working in London are now open to moving back to Europe in the wake of economic and political uncertainty.

Many are open to contract positions in this area, as they are more lucrative than permanent roles, and allow individuals the chance to drive change in an organisation and move on before a role becomes BAU. The issue of job security is diluted somewhat by the current demand for good candidates in this space, making the search for a new contract position less of a worry. As a result, we have seen a number of roles change from permanent to temporary, after firms initially failed to attract the desired talent.

DIVERSITY

In our conversations with hiring managers we often find that one the biggest challenge when  attempting to hire diverse talent is the lack of open discussion of the issues and practical solutions from a talent management perspective. One of the many benefits of a diverse team is avoiding the hazards of ‘group think’, but simply hiring a candidate because the employer believes that they possess a protected characteristic isn’t necessarily the silver bullet in achieving ‘diversity of thought’, and particularly when executed simply as a box ticking exercise.  With the introduction of the Gender Pay Gap Reporting obligations, and the government’s proposals for black, Asian and other non-white minority ethnic groups (BAME) reporting  legislation, this discussion is more relevant than ever.

To this end, BRUIN is in the process of setting up a breakfast forum around diversity, inclusion and unconscious bias in early 2019. This will focus on the perspective of BAME representation in Risk Management and examine in more detail this concept of ‘diversity of thought’ and practical solutions for talent management.

We are equally hopeful that this will appeal to Risk professionals, with topics including diverse talent processes, career development and culture, leadership and accountability on the agenda. Please feel free to contact one of our consultants for more information.