GLOBAL TREND REPORT RISK 014 H1 JAN-JUN
INCREASED RISK AWARENESS DRIVING GLOBAL DEMAND In line with our commitment to keep professionals and hiring organisations involved in Risk Management functions up to date with employment and recruitment trends, in April 2014 Morgan McKinley conducted an international survey of its consultants in eight regions. Overall the market has become very buoyant in most regions and we expect further improvement in the second half of 2014. Risk Management professionals are gaining in profile, especially in Financial Services and this means exciting and challenging times ahead. Growing awareness of business and financial risks is a common factor globally In many markets there are skills shortages in niche areas such as statistical analysis QUICK LINKS AUSTRALIA... 2 CHINA...4 HONG KONG... 5 IRELAND... 7 JAPAN...8 SINGAPORE... 10 UAE...11 UK... 13 Recruitment budgets are increasing in most regions Local legislation and international regulatory frameworks are driving demand Morgan McKinley is committing more resources to tackle the growing demand and new challenges In many markets there is a shortage of local talent so competition for quality candidates is becoming international 1
Morgan McKinley clients are hiring based largely on a good cultural fit as well as aptitude for the role. AUSTRALIA NEW REGULATIONS DRIVING DEMAND AND CROSSOVER With a raft of new legislation to deal with (APRA, ASIC, AusTrac etc.) there has been an upsurge in demand for new as well as replacement headcount in the Risk function in Australia. The general increase in public awareness of risk issues, in part driven by some high-profile failures and the threat posed by fraud and other crimes, has buoyed up the recruitment market in this space, says Dominic Bareham, Manager, Finance at Morgan McKinley Australia. We are currently seeing the greatest demand in the sub-disciplines of Operational Risk, Regulatory Risk and Liquidity Risk, while we expect Credit Risk to be an increasing area of concern. Demand is most highly concentrated at the middle or assistant manager level, largely the result of a high churn rate, and we have been particularly surprised at the growth in the number of contract hires in what is traditionally a more permanent-oriented market. However, job-seekers who land a contract role can often turn this into a permanent position if they network within the organisation and gain project experience. We are also seeing considerable crossover from Financial Services to Commerce & Industry. Morgan McKinley clients are hiring based largely on a good cultural fit as well as aptitude for the role, says Bareham. Candidates who have an MBA or similar postgraduate qualification, combined with experience in the regulatory environment and on risk projects will find good opportunities, says Bareham. Morgan McKinley has grown its Risk team in Sydney to manage this positive trend. Specific initiatives to help candidates and employers include the creation of a Risk and Compliance Community, Women in Leadership seminars and a Project Management Breakfast, as well as the usual Morgan McKinley focus on thorough interview preparation. In the current climate hiring organisations may miss out if they do not get headcount approval swiftly and they may find that candidates get counter offers. Persuading candidates to move can be challenging if they are well looked after by their current employers, says Bareham. We expect the market to remain buoyant throughout 2014 and beyond as the regulatory environment keeps evolving. Another key trend is towards an increased level of business partnering in the Risk function. 2
SALARIES & BENEFITS Despite the positive developments in the market many organisations are still operating to budget constraints so we expect salary levels to remain stable throughout 2014. 3
We face a challenging period ahead with new regulatory requirements being rolled out. CHINA INCREASED RISK AWARENESS BUT SHORTAGE OF TALENT In China there is a mood of growing economic confidence but this is coupled with financial uncertainty and a general increase in risk awareness, all of which factors are contributing to a more buoyant recruitment market, chiefly focused on Credit and Operational Risk at the middle management level. Organisations are also recruiting to approval functions, which may help speed the hiring process. Regulatory Risk is likely to feature more prominently in future. However there is a shortage of local talent, which may require organisations to look overseas, mainly to other APAC locations and Chinese nationals currently working abroad. The market was surprisingly quiet over the past six months but this appears to be changing, comments Rio Goh, who heads up Morgan McKinley s China headquarters in Shanghai. Given the shortage of talent hiring organisations are likely to face high salary requirements. Job-seekers will however need to demonstrate that they are up to date with changing regulatory requirements and are able to work with the business. We face a challenging period ahead with new regulatory requirements being rolled out, says Goh. Qualifications that are valued in China include a certificate in Risk Management or FRM or equivalent, an MBA or similar, and fluency in a foreign language. Experience in the regulatory environment is essential for many roles and a major plus for others. SALARIES & BENEFITS We anticipate an overall increase in salaries of around 10%. 4
Risk Management is becoming a more and more exciting and high profile activity. HONG KONG RAPID GROWTH OF PROJECT AND CONTRACT ROLES In Hong Kong the overall trend in recruitment into Risk functions in the Financial Services sector is positive. This is partly driven by the general economic upturn and partly by the fear factor of high profile failures, increasing threat of fraud and other financial crime as well as a general increased awareness of the importance of effective Risk Management. Regulatory Risk, Credit Risk and Liquidity Risk are the main growth areas. We have been especially surprised by the growth in the number of project and contract roles in Risk Management, comments Rouella Landicho, Senior Consultant for Risk, Legal & Compliance at Morgan McKinley Hong Kong. I would characterise the mood as one of cautious optimism, adds Nick Lambe, Managing Director of Morgan McKinley Hong Kong. We have seen increased hiring volumes but some companies are waiting to see their H1 2014 results before increasing recruitment budgets. The shortage of local talent means there are opportunities for overseas candidates, who tend to be sourced from China, Singapore and other APAC locations, though companies prefer to recruit internally for senior roles where possible. Demand is focused at the Assistant Vice President and Vice President level. Our advice to potential candidates who want to get ahead is to get a CFA, learn about the rules and regulations and build up project experience, says Landicho. The lack of supply means you will find good opportunities opening up in the near future. Nick Lambe adds that at the senior end of the market it is increasingly important to demonstrate not only technical competence but a wider understanding of what Risk Management can add to the business. Hiring organisations will need to anticipate a high level of competition for the best candidates as well as counter-offers from current employers. Risk Management is becoming a more and more exciting and high profile activity and I can see more and more front office professionals wanting to make a move into risk functions where their experience is proving useful. Everyone seems to want to get into Risk Management these days! However, compensation is still not where it should be and front office professionals may have to accept a lower package if they want to transfer into a risk role, comments Landicho. Candidates with experience in commodity, real estate and shipping could find more opportunities opening up in Hong Kong, too. With so many Financial Services professionals wanting to make a move into Risk, it is important that they fully understand the role. I make sure I give candidates a full briefing of what is going on in this function, including legal, compliance and governance aspects as they specifically apply in Hong Kong, says Landicho. Risk Management professionals will play a pivotal role in 2014 and beyond not only because regulations will evolve but also because Financial Services institutions increasingly understand the business value of the function, concludes Lambe. 5
SALARIES & BENEFITS We don t expect a huge increase in salary levels, perhaps in line with inflation at around 5-7%. Candidates can however expect a 10-15% increment when making lateral moves. Bonuses will remain at somewhere between 10 and 20% of base salary. 6
Irish companies are often keen to attract senior talent from outside the organisation and will look abroad. IRELAND DEMAND FOR PROFESSIONALS WITH RISK MODELLING SKILLS New regulations issued by the Central Bank of Ireland, combined with a growing awareness of the importance of Risk Management and the threats posed by financial crime have translated into higher levels of hiring into the function and, in many organisations, increasing recruitment budgets. New projects are being initiated, with the focus on Operational, Regulatory and Credit Risk. We have seen a surprisingly rapid growth in the number of anti-money laundering (AML) management roles being posted. On the whole there is an adequate supply of local talent but in some cases niche talent is thin on the ground. Candidates with very strong skills in risk modelling, particularly with SAS software, are very hard to source, and Irish companies may need to look abroad, comments Suzanne Murphy, a Financial Services Recruitment Consultant with Morgan McKinley in Dublin. Irish companies are also often keen to attract senior talent from outside the organisation and will look at the candidate pool in the UK and Australia, adds her colleague Louise Parkinson. For job-seekers it can nevertheless be a highly competitive marketplace as there are a lot of candidates for most positions, in consequence of the redundancies made in the Financial Services sector over the past five years. To get ahead, you need the relevant qualifications such as FRM or equivalent as well as a Master s degree in Financial Mathematics and Engineering. If you want to focus on Operational Risk, you should build up your knowledge of central bank legislation and gain experience of communicating with the regulator. If you have an aptitude for statistical analytics then focus on SAS as this will remain an in-demand skill for financial modelling. SALARIES & BENEFITS We anticipate a modest increase in salaries, probably in the range 3-8%. 7
Ambitious professionals should seek to play an active role in global Risk Management initiatives. JAPAN GROWTH IN DEMAND FOR OPERATIONAL RISK SPECIALISTS PREDICTED In the Financial Services sector we have seen no discernible change in the recruitment market in the Risk discipline recently, though there is a growth in general awareness of risk issues and the increasing threat of fraud and financial crime, which also pose political risks. One reason why the market has not grown overall is the consolidation of Market Risk functions in the region, in particular in Hong Kong, which has taken jobs away from Tokyo. Liquidity Risk is likewise more and more based in Hong Kong and Singapore. Senior bank management continues to be cost-conscious and this has reduced headcount in Japan, says Raphaël Bourgeois, one of our Financial Services managers in Tokyo. Growth continues to be focused on a broad area of Operational Risk, Enterprise Risk, Operations Control as well as Regulatory and Financial Risk. With ever more stringent requirements from regulators in Japan and overseas, banks have to strengthen their risk and control function hence Operational Risk professionals are in high demand, which makes our outlook optimistic for the rest of 2014. Meanwhile the implementation of Basel III since 1 April 2013 requires banks to strengthen their capital requirements. In Tokyo this has not translated into increased in hiring within Liquidity Management or Treasury Finance as it has within other APAC hubs; however it has created a demand for Financial Risk type accountants focused on capital adequacy. One surprising and welcome trend has been an increase in headcount in Credit Risk within the Corporate Banking sector. The growth in Cash Management and Trade Finance products since last year has prompted increased headcounts for Credit Risk professional to support relationship managers. An additional factor is the lack of local talent. Tokyo remains a candidate-short market largely as a result of cost-saving initiatives. Native-level Japanese language ability is typically a must when dealing with regulators, says Raphaël Bourgeois. Recruitment is mainly focused at the Assistant Vice President and Vice President level. There have been limited opportunities at the Head of Risk /CRO level. Nearly all vacancies have been permanent positions. There has been some contract hiring, but this is usually confined to credit administration function. Our advice to potential candidates is to stay on top of changes to financial regulations and seek to play an active role in your firm s global Risk Management initiatives. This will enable you to network within your organisation to raise your profile among your overseas peers. You should also build evidence of where you have helped your organisation to align its own goals with regulatory requirements as this can demonstrate your potential to add value to other organisations businesses when you seek a new opportunity. If you wish to move to another organisation, keep an open mind by considering opportunities across the entire Financial Services spectrum. 8
SALARIES & BENEFITS Banks increasingly regard Risk Management as their first line of defence and this, combined with the talent shortage, will exert an upward pressure on salaries. Whereas bonuses have declined in other Financial Services support functions, they will remain high in Risk Management, especially for individuals who can demonstrate that they have succeeded in adding value to their organisations. 9
Companies are looking for candidates who can deal with stakeholders and embed the Risk Management culture in the organisation. SINGAPORE RISK PROFESSIONALS WITH COMMUNICATION SKILLS MUCH PRIZED Operational Risk is the most buoyant of the main areas of recruitment in Risk Management in Singapore, followed by Regulatory Risk. We are seeing a lot of projects being initiated in response to regulatory changes. By contrast, Credit and Market Risk have been relatively quiet, with the focus on replacement headcount. With the economic outlook improving, we expect this to change as Credit and Market Risk hiring increases broadly in line with business activity. Overall candidates are fairly passive open to an approach but happy to remain with their current employer until things pick up further. In Singapore the contract market is not particularly mature as the pay tends to be low compared with permanent positions and benefits minimal, so this also tends to reduce the level of churn. Hiring organisations are finding it difficult to identify candidates who not only bring technical competence but also the ability to deal with difficult stakeholders and embed the Risk Management culture within the organisation, comments Yien Quek, a Risk Recruitment specialist at Morgan McKinley s Singapore office. Therefore my best advice to individuals seeking to step up is to build up your communication skills, as this will set you apart from your competitors. Candidates must also keep up to speed with regulatory changes, especially in Operational Risk. SALARIES & BENEFITS We anticipate that salaries will remain flat in 2014 though we have noticed a change in attitudes on bonuses. A major global bank paid bonuses to most staff this year after two years of minimal or no bonuses. 10
Managing Credit Risk is a constant and growing challenge faced by businesses operating in the UAE. UNITED ARAB EMIRATES POSITIVE DEVELOPMENTS WITH HUGE DEMAND FOR ARABIC-SPEAKING RISK PROFESSIONALS We have been delighted to see how the economic upswing is driving demand for new and replacement headcount in the Risk function in the UAE, with recruitment budgets increasing as Financial Services companies get to grips with heightened awareness of risk and the threat of financial crime. The focus is on filling roles in Credit, Market and Operational Risk. Managing Credit Risk is a constant and growing challenge faced by businesses operating in the UAE for a number of reasons. These include recovering debt, which can be difficult and expensive due to the uncertainties of the legal process and the fact that costs are generally not recoverable in full. It is therefore important to avoid or mitigate these risks by having an effective credit control system in place and maintaining good records, says Anthony Graves, Manager for Credit, Risk & Compliance recruitment for Morgan McKinley in Dubai. There is a local talent shortage so many institutions are looking abroad, in particular to source mid-management and senior risk professionals who can fulfil technical roles such as the implementation of Basel programmes. Most of these will be found in the UK, continental Europe, Australia and other APAC locations. One of the most interesting developments has been the increasing awareness of governance issues in the MENA region over the past six months, which has enabled risk managers to assert their independence more strongly. We encourage anyone working in the risk area to develop strong relationships with board members in their current institution as proof of effective partnering with the business will help you to advance your prospects. The main qualifications and experience sought after include a certificate in Risk Management/ FRM or equivalent, an International Diploma in Risk Management and a Master s degree in Financial Mathematics or Engineering. Fluency in a second language is a major advantage too, and well-qualified candidates who are fluent in Arabic are very much in demand. Non-Arabic speakers may find it difficult to secure some key positions, especially as there are nationalisation programmes in place in many MENA countries. Looking forward we are confident that we will see further movement in the market with senior risk managers open to accepting new challenges that will develop their skill sets and help them raise their profile within MENA s risk community. At the same time, hiring organisations will undoubtedly increase headcount further. 11
SALARIES & BENEFITS Increased demand and local talent shortages will drive salaries upwards in 2014, probably in the order of 10 to 15% overall. 12
Greater exposure also means working with stakeholders who are not used to dealing with risk managers. UNITED KINGDOM. EXCITING BUT CHALLENGING TIMES AHEAD FOR RISK PROFESSIONALS We have seen an improvement in the recruitment market for Risk Management professionals in the United Kingdom over the past year. Awareness of risk has undoubtedly increased due to high-profile failures, the threat of fraud and financial crime and the economic uncertainties of the recession years. However, there are some challenges with a shortage of local talent, particularly at middle and assistant manager level, necessitating recruitment from abroad, mainly Ireland, mainland Europe and Australia. Recruitment is currently focused on Operational, Credit, Investment, Financial and Market Risk. A developing area is Conduct Risk. We ve been especially taken aback by the scale of new recruitment by the Big Four, with one firm alone hiring into approximately 400 new roles, comments Karl Alliban, Senior Consultant for Operational Risk, Governance and Internal Controls at Morgan McKinley s London office. On the demand side, we have seen a relaxation of recruitment freezes and other cost-cutting measures and, in general, recruitment budgets are increasing. However, hiring processes tend to be lengthy as organisations try to find candidates who tick all the boxes. My advice to candidates is first, to be aware of the current trends and gain relevant experience, for example of new regulations, and to make sure that you can back up what is on your CV by preparing intensively for interviews, says Sam Turner, a London-based Risk Recruitment consultant with Morgan McKinley. You need to be able to adapt your skill set in a fast-changing environment. Knowledge of ICAAP, ILAA and Basel III are particularly relevant as this type of experience is currently highly valued by the banks, adds Karl Alliban. The profile of Risk Management professionals is definitely on the up within Financial Services. They are gaining experience of more areas of banking and even juniors are getting exposure among senior stakeholders. As a result roles are also becoming more challenging as there are many stakeholders who are not used to dealing with risk managers, says Alliban. In response to this development Morgan McKinley is investing even more effort in giving candidates a clear appreciation of what a job will entail, both to manage expectations and make them feel convinced that the role on offer is the right one. For many roles, proven ability in statistical analysis is a vital asset alongside certification in Risk Management or FRM and accounting qualifications. Companies are also looking for candidates with a Master s degree in Financial Mathematics and Engineering. Risk professionals will be more and more targeted at capturing regulatory capital, says Turner. 13
SALARIES & BENEFITS We predict that successful candidates will be able to leverage the favourable market conditions and the majority will be expecting a 20% pay increase if they decide to move. 14
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