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An overview of the Risk Market

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“Risk” is the hot word on everyone’s tongues. The Press talks endlessly about the need to hire risk managers. So do the regulators. Internal auditors are compelling their stakeholders to increase risk headcount. Risk is almost everywhere one turns. This looks set to be the case for many years.

 

Key features of the London Risk Management market thus far in 2013:

 

Permanent roles are less attractive than ever before. People see regular rounds of redundancies as a sign that job security has evaporated. Few candidates join a company with a view to spending much of a career there. “Job hopping” has become the norm. This horrifies those who have displayed loyalty to their employer for years but the market is unlikely to ever revert back to how it used to be.

 

Many Managing Directors are finding life tough as layers of management are stripped out. Leaders who can face-off to senior stakeholders whilst simultaneously remaining “hands-on” with risk details are the order of the day. Q4 2012 and Q1 2013 saw a number of MDs’ roles made redundant. A significant proportion of the people who performed these roles will never run such large high-status empires ever again.

 

Risk Change is where the volume hiring is. Risk BAU is growing steadily but more slowly. The demand is for those who can improve systems and re-engineer processes so that banks can produce long-term profitability. As banks trade less, innovate less, and deal with implementing compulsory statutes like Dodd-Frank, “Business As Usual” now translates as “Dealing with Regulators”. This is seen by many as a boring role: zero visibility if the job is done well, utterly far-reaching downsides if things go wrong.

 

Compensation has not changed significantly from 2012. Perm BAU Risk positions continue to pay the same. Contracting rates, particularly those in Risk Change, whilst not hitting the astronomical figures being offered in the immediate aftermath of the Credit Crunch, nevertheless remain high. Roles ranging from £450 - £850 per day are commonplace in the London market. The number of hitherto permanent employees who are now prepared to accept a contract opportunity is helping to fill the shortage in demand.

 

London has never been so fragmented in terms of which organisation is seeking what kind of risk talent. Job titles and the nature of compensation packages vary widely, more so than in other areas of Infrastructure.

 

Risk vacancies frequently stay open for over six months, as niche skills sets are incredibly difficult to find.

 

 

 

Risk Overview by Risk type

 

Operational Risk. For many years, Operational Risk had to suffer the ignominy of being the ugly sister of Credit Risk and Market Risk. As hiring in non-financial risk continues to soar, this is no longer the case. What has been happening in Operational Risk?

 

UBS and other well-publicised incidents demonstrated that a lack of a strong “Risk and Controls” culture can lead to financially-devastating consequences. This has had banks scrambling “not to be next”. Banks have hired in significant numbers to upgrade their first, second, and third lines of defence.

 

Job titles along the lines of “Risk & Controls” “Fraud Risk” and “Business Risk Management”, have become commonplace. A number of classic operational risk managers feel qualified to perform these roles but often the demand is for an auditor or financial products expert to move into such positions.

 

Investment banks have attempted to hire in very specific areas. Niche skills sets such as “Operational Risk Manager with Equities knowledge” and “IT Operational Risk Specialist” have become in demand ahead of Group Operational Risk types.

 

 

Market Risk. Market Risk Management has continued its transition from being a “sexy” area of risk to a process-driven almost purely “regulatory” function.

 

The main area of BAU staffing in Market Risk has been in VaR Production (also known as Market Risk Engineering and Market Risk Operations). Demand has been particularly high for those who can produce accurate VaR reports within tight timeframes and not complain about the repetitious nature of the job. Candidates have been happy to perform this role as temps, but have been quite reluctant to pursue it as a permanent career move for fear of being typecast as copy-and-paste employees.

 

One thing that has remained consistent over the years is that Trading Risk roles have generated far more interest than anything VaR or Economic Capital or regulator specific. Even though the market is moving away from trading risk being the most topical area, candidates still prefer classic “desk risk manager” mandates.

 

Sporadic hiring across asset classes at Asian banks (of all sizes), larger Tier One American investment banks, and European banks has occurred. Two investment banks have come to the table with “Head of” vacancies – with absolutely no shortage of senior risk managers applying.

 

 

 

 

Credit Risk. In contrast to Operational Risk and Market Risk, Credit Risk hiring has been steady and not strewn with new job titles in 2013.

 

Wholesale banking has provided a significant proportion of the demand for Credit Risk Managers this year. Credit Portfolio Management, Mortgage Risk, and Credit Risk Modelling abilities have been the most sought after skills sets. This is no different from in previous years.

 

Large scale Credit Risk Change programmes continue to be signed off, as banks attempt to revolutionise their risk architectures. Candidates overwhelmingly prefer to contract in this area.

 

Consulting firms continue to make significant profits (amounting to tens of millions of pounds) by advising banks with regards to their credit risk systems and overall risk appetites. Credit Risk is the least saturated market in terms of candidate supply, leaving banks with no option but to hire assistance via consultancies.

 

A key shift in the Credit Risk market has been the desire of candidates to work in clearing houses. Indeed, the overall status of clearing houses is on the rise.

 

The War for Talent in 2013

 

Most hiring in risk management has been strategic. This has been in response to legislative pressures but also in adaptation to the “new BAU” in financial services: smaller profits, a banking industry that stumbles from crisis to crisis, and a sector that must work tirelessly to repair its damaged reputation.

 

Banks have never been on the receiving end of swathes of legislation and consequently the nature of risk management has changed. The cost demands on risk infrastructure and the investor pressure on RWAs means that banks have to get risk hiring right.

 

There is actually an oversupply of risk candidates in London but most of them are seen as mere “Shift F9” button pushers who mitigate few risks and add little value to their organisation. It takes longer to find the right candidate in Risk than it does in other infrastructure areas (such as Audit, Compliance, and Finance). This is because the Risk Management population differs markedly from bank to bank, and in turn produces candidates with highly variable personalities and abilities. Find a candidate who is genuinely going to save a bank from a huge financial loss or severe reputational risk incident remains a needle in a haystack challenge.

 

The War for Talent in 2013 has centred upon risk professionals who can develop robust, effective, risk frameworks. These are people who can communicate the nuances of risk systems, methodologies and appetites to very demanding stakeholders. These stakeholders are mainly senior management and regulators. Currently, when it comes to Risk Management, the ultimate stakeholder is the general public. This is an audience which remains ferociously sceptical about banks’ abilities to manage their risks.

Louis Altman
Posted by Louis Altman
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