Risk Management – H1 2016 Market Update

Written by India McPherson on 24/08/2016

Market Overview

Throughout the first half of 2016 there has been consistent uncertainty encouraged predominantly by ongoing cost cutting throughout the leading global organizations and of course the EU referendum. These 2 leading factors combined with issues across wider global markets, in particular equities, FX and China’s slowing growth, has impacted Risk recruitment, to some degree, across all disciplines.

In the first few months of 2016 much of the reluctance to hire was a result of wide scale cost cutting throughout the large Investment Banks with some risk functions questioning the need for replacement hires in addition to securing sign off for new positions. In the lead up to Brexit there was further hesitation within organizations headquartered outside of the UK and specifically those headquartered in other European countries in relation to the location of certain hires. In the initial aftermath of Brexit we saw some roles pulled while early uncertainty really took hold, however this seems to have relaxed somewhat as the reality of the situation has sunk in. The realization that key decisions are unlikely to be made for some time yet has led to more of a BAU approach in hiring within the UK Risk market, however negotiations relating to pass porting will certainly be instrumental in strategic decisions over the next 5 years.

A trend of note is the increasing flexibility of many individuals to open up to opportunities they may not have considered this time last year. With the rise of challenger banks, peer to peer lending, fin tech and quant advisory companies there has been significant growth in the diversity of options opening up to strong candidates with some Director level individuals willing to focus on the remit of the role at stake as opposed to corporate title. Despite this, for more cautious candidates and those who currently have job security this type of opportunity is just too risky and thus are holding off their job search and instead waiting for clarity regarding the wider economic environment.

Market Trends - 

Operational Risk

Hiring across Operational Risk functions in 2016 has been less pertinent than during Q3 & 4 of 2015 with many teams seemingly settled and budget diverted to other areas, in particular Market Risk. The evolution of this discipline appears to be reaching a plateau in the mainstream institutions with development prospects only present in those organisations where frameworks or controls have perhaps become slightly stagnant or less efficient. Greenfield opportunities are now almost non-existent and so candidates looking for a ‘new challenge’ are being tempted by challenger banks or peer to peer lending companies where the ability to be creative and utilize past experiences to create new frameworks, controls and policies can still be found.

Market Risk

Market Risk functions throughout 2016 have been strengthened significantly on both a perm and interim basis in anticipation of FRTB and Quantitative Impact Studies. There has been a specific focus on Stress Testing, Market Risk Methodology, Market Risk Analytics, Model Validation specialists and Scenario Analysts with some Tier 1 Banks exceeding the tight budgetary allowances to ensure they can meet regulatory expectations. To ensure that there is a real focus on the quantitative elements of this discipline and also due to the relatively shallow candidate pool within this space at VP and above, we are seeing a drive to hire at Analyst and AVP to essentially ensure plenty of hands on deck. Due to an increase in the variety and availability of MSc degrees within the Quant field there has been a surge in qualified individuals expressing a clear interest in entering this field thus 2016 has been a good year so far for strong graduates in the 1-3 year bracket. At the other end of the spectrum candidates should not be put off by the clear lack of VP and Director hiring. The Risk and Quantitative Analytics arena is a key area of development for many organisations looking to clean up old and inefficient systems and create easier ways of collecting and analyzing data and ensuring computational efficiency.

Credit Risk

There has been sporadic hiring across the Credit Risk space throughout 2016 so far with a slow start to the year and very little opportunity for growth. Throughout Q1 there were predominantly replacement hires within the Credit Analysis space at AVP level but no real trend took hold. As the year has moved on there has been a growing emphasis on credit modelers, policy and counterparty analysts across corporates, FI and NBFI although a few larger banks are looking to relocate entire divisions to other European financial hubs, namely Frankfurt.

One new area of focus for Credit Analysts could be the peer to peer lending space which certainly has a demand for counterparty risk analysts and decision scientists. These new and innovative financial companies are willing and able to learn from the mistakes of the investment banking world over the past 10-15 years and have huge and growing potential for gaining substantial market share in the near future.

Compensation

Trends relating to compensation throughout the year so far have merely been reflective of the wider environment with visibly lower bonuses and base salary increases impacted by cost cutting. Consistently over the past few years we have seen increases ranging from 10, however the realization that candidates may not see this sort of uplift has slowly sunk in. Although this trend is becoming the norm there is often room for negotiation where a skill set is in high demand particularly within the more quantitative risk disciplines. On the whole, remuneration, certainly total package, is playing less of a role in bringing candidates on board and instead there is a greater emphasis on understanding both candidate and client needs. In effect selling the non-materialistic elements of the role such as progression, value add to CV and scope is increasingly important.

Conclusion

Despite the uncertain and slowed growth across the industry this year, Risk Management is an area which continues to be an area of overall growth not decline. The evolution this function has experienced over the last 10 years is set to remain and will continue to diversify as new and developing risks come to the foreground thus requiring candidates to become adaptable and forward thinking. The ambiguity of the current climate has increased the need for us to understand our markets and additionally source strong individuals proactively using our network for referrals and headhunting.

 

For a further conversation, confidential consultation or assistance sourcing candidates please contact India McPherson on 0203 301 8712 or alternatively please email india.mcpherson@blackswangroup.com

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