2018 risk management salary guide for both the permanent and contract markets in London, with regulation changes driving hiring.
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2017 was a challenging year in risk management, particularly in the credit risk market as there was a decrease in jobs compared to the previous year. There are a number of factors that contribute to this, but a large focus has been on the lack of clarity around Brexit. There was however a promising increase in quantitative analytics roles and the buy-side risk market.
There was an increase in director level hiring across the board and a noticeable trend of an increased demand for talent requiring a more specialised and niche skill set. A number of investment banks had a consistent hiring pattern that focused on replacing leavers in teams as opposed to hiring for growth. There was aggressive hiring in the hedge fund and asset management sectors as well as smaller banking organisations.
At the end of 2017 there was a large increase in quantitative roles in the market in the hedge fund and banking areas. This was due to numerous new regulations that banks had to implement, combined with various organisations going through ring fencing operations.
There was an increase in jobs in the leveraged finance field across credit risk, mainly due to a large number of new deals executed in the LBO space. This was due to many credit teams being previously short staffed in this area and needed to bolster the teams to provide the relevant support and focus. We expect this area in 2018 to continue growing as the corporate credit sector has experienced an increase in new deals throughout last year. We have also seen an increased demand for candidates with experience of R and VBA object tools.
There is still uncertainty around Brexit and what this could mean to risk teams. One thing that is evident is that certain banks are offshoring many of their corporate credit teams and sticking with only the complex transaction credit teams. Regulation changes drove many of the regulatory risk hires in 2017 and will continue into 2018. With IFRS9,there is no sense to slow down and will only move forward.
Within the quantitative field, there has been numerous opportunities on both the sell side and buy side throughout the year with most companies requiring candidates with the same skill set. These quantitative skills include: a first class degree from a top ten university, maths Olympiads and top of the class credits. A PhD in a technical and engineering focus discipline as well as having strong experience in R and VBA, MATLAB.
Other qualities and skills within the risk management discipline include a good understanding of financial mathematics, probability and statistics, as well as an understanding of derivatives and financial risk metrics. Experience of counterparty credit risk (or other portfolio) modelling, model review and development roles are also admirable. The key factor we have noticed is the ability for a job seeker to be able to demonstrate all these skills and also be able to explain in a quantitative and qualitative way.
Companies are looking for individuals that stand out, are able to hit the ground running, elevate a team and showcase value. This means that companies are demanding top talent and are willing to take the necessary time to find the right person. While companies are in the driving seat, they must be aware that strong candidates will generally have multiple offers and once placed, be well looked after. It is more common in this field that an employee that is doing well will progress in the ranks more quickly to show a sign of appreciation.Because of this, prospective employers need to understand that recruitment processes need to be sped up and roles need to be moved along quicker to get the right person. They must also be willing to offer attractive packages to ensure the candidate understands how much they are valued.
Brexit and diversity remain at the forefront of all discussions throughout 2017 and will continue into 2018. On this note, there was a steady rise in Tier 2 Visas for candidates and clients showcasing an openness to sponsoring candidates. This is sending out positive messages post brexit that the market will get the right people on board and if we need to sponsor the right candidates, they are willing to do this.
However, we do anticipate that many banks will downsize certain teams with Brexit, and the relocation of many units will be happening more aggressively to keep up with budget cuts by running more smaller and efficient units. Another notable trend is the drive to find more female staff within risk management jobs is still a key focus area within recruitment. Particularly in certain fields such as the quantitative area where there is a lack of females currently.
On the back of 2016, which was one of the most challenging years from a risk recruitment perspective since 2008, we headed into 2017 with uncertainty. 2016 was the beginning of budgets being drained by MiFID II, confusion around whether to push ahead with FRTB, IMM and IMA waivers as well as the continuation of the movement away from AMA operational risk models. As we review the previous year of 2017, we saw Theresa May losing some of her dominance in a snap election, and this in turn has made people concerned about her power to negotiate Brexit effectively.
Barclays and Credit Suisse appointed new people at the top and Credit Suisse in particular had migrated from an investment banking focus more towards private banking and wealth management. Even more noticeable was their transitioning of a lot of their business to Ireland and Switzerland, as well as Poland and India; therefore resulting in a dramatic reduction in their volumes of hiring.
Many of the simple and more manual roles have been moved to cheaper cost locations. With the birth of Blockchain technology and the ability to automate previously manual process driven roles performed back office meant that there are some positions that are currently and potentially permanently redundant in London.
Although the overview may appear to be a bit doom and gloom, there has been increased demand for certain risk management jobs particularly within the 3rd quarter of the year. With the consistent annual trend that the 4th quarter being the busiest of the year.
Looking towards 2018 as budgets are being set, we anticipate a growth in hiring. Regardless of political factors and predictions, we expect that the ECB are still saying that banks need to hit their deadlines for the delivery of FRTB. This is obviously predominantly market risk focused. Within credit risk, under new accounting standards under IFRS9, this is also driving recruitment in wholesale credit risk.
The roles that are in demand are currently around methodology for market and counterparty credit risk. Particularly within market risk, this refers to the introduction of expected shortfall as an add on methodology to historical simulation VaR and requires people to calculate the average losses of their tail risk. Companies will also be looking at PnL attribution and a move towards portfolio full Re-Val, as well as the more traditional Greek based VaR. There are development skills required with a particular focus on C++ and the introduction of Python as a development language. Counterparty credit risk is experienced increased demand for this skill set in pricing. This would also include all calculations around XVA - DVA, CVA, FVA.
With more people over the last number of years coming out of university with a quantitative background, we are seeing a shift to risk methodology as this is where the bulk of the work has been. An increasing challenge in finding talent with experience in pricing model work, potentially because pricing anything exotic took a hit after capital requirements became so intense for anything deemed exotic.
Model validation has also seen an increase due to financial institutions needing to have more models per asset class to get IMM and IMA waivers. Therefore, the regulators require models documented to a particular standard - which is currently the FED standard of SR11-7 for documenting model change. This, in turn, makes it easier for the regulators to approve or challenge models for these waivers which can have colossal capital implications.
Operational risk is also a bit busier - especially across the first line of defense, but also within assurance, which we consider to really sit as line 2.5 between the 2nd line and internal audit. IT controls and cyber security are also growth areas for obvious reasons, especially with the increased reliance on technology and the birth of things like GDPR. We do not know what the knock on effects of Brexit are going to be, but we anticipate that it is going to cover many facets of banking within the UK market and should drive some hiring for 2018.
One of the hot topics is getting women back to work after maternity leave, and beyond as a mother. Companies are also requiring recruitment partners to submit balanced submissions of men and women for all positions. Organisations are are placing top priority on trying to get more women in more powerful positions and pulling up agencies who are not sending balanced shortlists to the jobs that organisations are recruiting for.
Some organisations are managing to do this with great effect, whilst others less so, but it is unanimously thought of as a positive change. There is also the ongoing concern about unbalanced salaries between men and women, however this is more in relation to permanent members of staff rather than contractors. What we are seeing is women deciding to take on contracts for the very reason that they feel underpaid or under promoted, and in some instances their partners can have a permanent role with an element of security whilst she can make the real money in a contract.
From a contract point of view, you can have a successful, challenging and fulfilling career as a contractor; however, consistency is key. To take a load of short term contracts adds nothing to a CV and leaves question marks over one's employability and commitment. Anyone who lowers their rate to get a longer term assignment will be more employable and make more money in the long term, so it’s worth thinking beyond the next 6 months if taking on a contract.
It is difficult to pick out trends relating to anything further than regulation. I would consider where you are going to be in the next 5 years. If you worked in CDO structuring in 2007, you probably are doing something very different now. If you were contracting in risk reporting across either exposure monitoring or excess management, you have probably seen these roles dissipate as they are now in cheap cost locations or soon to be fully automated. How are you going to ringfence your employability in this ever changing sector? Although this might seem a little doomsday, you can make small changes to focus your career on areas where you are more employable. Strive to get more exposure to growth areas within financial services and don’t rest on your laurels if you can see your skill set going the way of the CDO cubed.