2015GLOBAL TREND REPORT RISK

2015 | OUTLOOK

DETAILED KNOWLEDGE OF NEW REGULATIONS OFTEN THE KEY TO SUCCESS

• There is an interesting contrast between countries where candidates with soft skills are at a premium, such as China and Singapore, and countries with a more technical focus, such as the UK

• Risk is becoming ever-more specialised. Candidates with in-demand niche skills will do well

• Networking is particularly important in the risk discipline

• The market has improved noticeably in Australia

• In China and Hong Kong there is a high level of demand for bilingual candidates

• There is a talent shortage in Ireland in many specialist areas

• In Japan the employment market has bounced back strongly after a period in which many functions were offshored

• Singapore has not improved significantly, but candidates with a holistic skill set should have no trouble landing a good role

• In the UAE there is a shortage of local talent but we expect this to ease in 2015

• In the United Kingdom candidates are reluctant to move and this may exert some upward pressure on salaries

In line with our commitment to keep professionals working in the risk discipline up to date with employment and recruitment trends, at the end of 2014 Morgan McKinley conducted an international survey of its consultants in eight markets. In most of the world’s financial centres the agenda is being driven by regulatory, market and credit risks.

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QUICK LINKS

AUSTRALIA .............................................. 2MAINLAND CHINA ...............................4HONG KONG ......................................... 5IRELAND .................................................. 6JAPAN ....................................................... 7SINGAPORE ............................................ 9UNITED ARAB EMIRATES .................. 10UNITED KINGDOM ............................. 12

In the latter half of 2014 Australian investment banks started to hire again, reflecting an improvement in economic confidence across the financial services sector. As in other countries risk is high on the agenda as a result of political pressure, the threat of losses through fraud and other financial crimes, and of course, high profile failures. Recruitment budgets are increasing, with many financial institutions staffing up for regulatory risk and risk change projects. “Regulatory risk will remain the top priority going into 2015 and we also expect strategic risk to drive employment growth. We are seeing a number of projects being planned in risk system transformation and enhancement,” says Sophie Peers, Consultant, Risk & Compliance at Morgan McKinley Australia.

Recruitment is focused on middle or assistant manager level in the AUD 80,000 to 150,000 pay bracket. “Risk managers with niche skill sets relevant to products or business areas, such as

superannuation and wealth management, are the ones currently most in demand,” says Peers. However, most of the hiring in risk management practices is replacement headcount or in response to a realignment of resources, particularly within Australia’s top four domestic Australian banks.

The contract market is also buoyant, with most employers open to a temporary resource option. “The extent of the increase in contract and temporary hires has taken us by surprise,” says Peers.

The supply of suitably qualified specialist talent is currently adequate to meet the demand. “However, there has been some debate in Australia about the lack of a recognised risk qualification or formal training programmes, which means that there are too few younger candidates coming through who can hit the ground running,” says Peers.

“The quality of candidates who apply directly for roles in risk management is low, while the better candidates who already have good positions at leading banks have little incentive to move, especially when they know that they will have to put themselves through tough and lengthy interview processes ” says Peers.

“My advice to risk professionals who do want to move forward is to acquire in-demand niche skills, broaden their technical knowledge, network and work with the support of a senior mentor or sponsor. Most importantly, aim to be a business partner and trusted advisor,” says Peers. “It really does help if you work with a good recruiter who understands your strengths and your career goals,” she adds.

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There has been some debate about the lack of a recognised risk qualification.

OUTLOOK OPTIMISTIC AND CONTRACT MARKET BUOYANT

AUSTRALIA

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SALARIES & BENEFITS

We don’t envisage any change to salary levels moving into 2015. Performance related pay is likewise static.

The general increase in risk awareness and talent shortage are making Mainland China a land of opportunity for suitably qualified risk specialists, with credit risk, operational risk and market risk particularly strong growth areas. Demand is strongest at middle and assistant manager levels and many Chinese organisations are turning to other APAC locations to source candidates. “We have also seen a lot of changes at the senior end of the market in recent months,” says Rio Goh, Country Head, Morgan McKinley China. “The environment is getting more complex

and banks are going to be subjected to further controls, which is putting greater pressure on their risk staff. We expect to see some salary inflation as they compete for top talent,” he adds.

Risk professionals who take the trouble to get exposure at the front line and understand the business model better will be in an excellent position to move forward. Fluency in a second language is a major asset together with a thorough knowledge of the regulatory environment.

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The risk environment is getting more complex and there is more pressure on risk staff.

DEMAND FOR NEW HEADCOUNT AND TALENT SHORTAGE DRIVING SALARY INFLATION

MAINLAND CHINA

SALARIES & BENEFITS

Salaries are likely to increase at an average annual rate of 10% and we expect to see more performance bonuses linked to the quality of client portfolios under management.

High profile failures, the increasing threat posed by fraud and other financial crime and the general increase in risk awareness have been driving demand for both replacement and new headcount in Hong Kong, while the economic environment has been improving. Regulatory, credit and operational risk are the main focus areas but many organisations are finding it difficult to identify and secure suitably qualified local talent – many are looking to Mainland China for candidates but here too there is a talent shortage. “There are plenty of openings at middle and assistant manager, assistant vice president and vice president levels. The contract market is also very buoyant. It is becoming more and more common to hire contractors, especially for risk project management roles,” says Rouella Landicho, Manager, Risk, Legal and Compliance at Morgan McKinley Hong Kong.

“Recruitment into credit risk roles has become very active in Hong Kong, one good reason being the

strength of the bond and debt capital markets,” adds Landicho.

We expect risk professionals to become more proactive in seeking new employers. “This will especially be the case if as expected bonuses turned out to be lower in 2014 than in 2013,” says Landicho. Candidates will stand out if they combine a certificate in risk management with a professional accounting qualification and fluency in a second language, which in Hong Kong means Cantonese or Mandarin. Networking is very important in this market, as is visibility on high-profile projects. Employers also place increasing emphasis on the ability to communicate effectively with senior stakeholders.

“It has been difficult to recruit native or fluent Mandarin speakers into credit risk roles. Moving forward we expect to see even greater emphasis on business risk management and front office risk roles,” concludes Landicho.

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It is becoming more and more common to hire contractors, especially for risk project management roles.

DEMAND FOR BILINGUAL CREDIT RISK SPECIALISTS

HONG KONG

SALARIES & BENEFITS

Risk professionals making a lateral move can expect an increment in the order of 10-15%. Bonusees have been quite stable, between 10 and 30% at assistant vice president and vice president levels and a little higher at senior management level.

In Ireland risk management roles are becoming increasingly specialised both by area (for example, upstream risk and technology risk) and by product (for example mortgages and term lending, as companies look into the viability of new products). Overall, the trend in 2014 was positive, with many organisations recruiting new headcount, largely in response to the general increase in risk awareness and the threats posed by fraud and financial crime. Operational, credit and regulatory risk are the main employment growth areas, with middle and assistant managers in the €55-90k bracket most in demand. The Big 4 practices are also building up their risk advisory teams, after a few years of lower levels of recruitment.

There is a growing talent shortage as risk specialisations are relatively new to the Irish market. “Irish companies have had a preference

for British and Australian candidates if they cannot find the right fit locally but many Irish professionals who have been working abroad are now returning home, which is encouraging,” according to Louise Parkinson, Financial Services Recruitment Consultant at Morgan McKinley Dublin, Banking and Insurance. In this climate the contract market will also remain very buoyant, with lucrative daily rates available.

Experience in SAS/SQL and probability of default (PD) modelling are much prized in the credit risk sphere while companies look for relevant industry exposure and experience in Big 4 auditing when hiring into the operational risk function. “My top piece of advice is to specialise, gaining any relevant experience in sub-disciplines such as upstream or regulatory risk,” says Parkinson.

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Hiring organisations may face a challenging 2015.

RISK MANAGEMENT BECOMING MORE HIGHLY SPECIALISED

IRELAND

SALARIES & BENEFITS

With the growing talent shortage there is a strong upward pressure on salaries, which are currently increasing in the order of 10-15% annually.

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Risk management professionals have a greater appetite for new opportunities as employers are creating new headcount.

The past nine months have seen a rather surprising increase in the number of risk management professionals looking for new opportunities as employers are creating new headcount. Much of this new headcount is focused on new areas of market risk and regulatory reporting. Furthermore, we have seen many organisations looking to recruit into operational risk areas and the initiation of many risk change projects.

“Operational risk is the one area where there is a substantial pool of suitably qualified candidates. Hiring managers also have the option to consider candidates working in risk management operations control at Big 4 and other consultancy firms,” says Lionel Kaidatzis, Managing Director, Morgan McKinley Tokyo. “In credit risk the candidate pool is more finite, as the pool of experienced talent has been reduced as a result of the earlier offshoring

trend. Hiring managers within investment banks often recruit more junior risk management professionals who possess transferable quantitative and modeling skills from other financial institutions with a view to developing their capital market knowledge. It is not uncommon for candidates from asset management, data analytics providers, Big 4 practices and consultancies to make the move,” adds Kaidatzis.

There is less movement at the senior level as Japanese organisations prefer to rely on external consultants and auditors.

There has also been a substantial uptick in demand from practices, primarily in operational risk. “The insurance market, which has until now not been as strictly regulated, is now coming under more scrutiny from local and foreign regulators.

Consequently, both life and non-life insurers are under more pressure to improve their processes and systems,” says Kaidatzis.

With the market becoming more competitive, those organisations that have streamlined their interview and hiring approval processes will have the upper hand in beating the competition to talent.

Native Japanese language skills are becoming almost mandatory for most roles. “In addition to strong analytical, and depending on the role, strong quantitative skills, the ability to report in Japanese is what defines high-profile candidates,” says Kaidatzis.

In stark contrast to other regions, the contract market is almost non-existent in Japan.

A REVERSAL IN EMPLOYMENT TRENDS

JAPAN

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SALARIES & BENEFITS

Salaries increased but only marginally in 2014 at most levels. Risk professionals at vice president level and above have commanded substantial increases of around 20%.

Some large banks in Singapore have been slow in building their risk teams in response to new local and global regulations. Economic uncertainty and static or declining recruitment budgets mean we have seen no discernible positive change in the employment market despite growing awareness of risk and regulatory issues. Globalisation of functions is a further factor. Nonetheless, there is some growth in the demand for talent, particularly in the areas of regulatory, operational and increasingly, credit risk, and many banks are initiating risk change projects.

“Singapore-based companies are also encountering difficulties in identifying candidates who offer a holistic skill set, combining technical knowledge with the ability to see things from a strategic perspective,” says Yien Quek, Recruitment Consultant, Risk at Morgan McKinley Singapore.

“Candidates who meet this requirement will do well. The key to success is to understand how the risk framework impacts different areas of the business, and to do that, you must build relationships with front and back office stakeholders.”

The siloed nature of many roles in banking, especially investment banking, is making it very difficult for candidates from a specialist background to transfer into other roles unless they bring some added value. “Morgan McKinley can make a positive contribution here because we can provide candidates with information enabling them to look into areas where they can take on additional responsibilities or move internally, improving their overall profile,” says Quek.

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The key to success is to understand how the risk framework impacts different areas of the business.

RISK SPECIALISTS WITH HOLISTIC SKILL SETS HIGHLY VALUED

SINGAPORE

SALARIES & BENEFITS

Little discernible change now or for the foreseeable future.

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Bringing forward more junior-level candidates may be a better option than enticing a more expensive senior one. UNITED ARAB

EMIRATES

We have been surprised by the lack of suitably qualified local talent available and ready to move jobs in the risk management discipline in the United Arab Emirates. “There has been much stronger demand from overseas talent looking to relocate. Moreover, hiring managers have not been flexible in terms of considering slightly more junior level candidates and developing their skill sets to let them grow into the role. Risk managers are bright people and this is often a better option than trying to incentivise a more expensive senior candidate to make a sideways step,” says Anthony Graves, Manager, Risk, Compliance & Legal at Morgan McKinley’s Dubai office. It is currently difficult to secure top talent with UAE experience. “Locally based talent generally has higher salary expectations than talent from abroad,” says Graves.

Leading regional banks continue to pay a premium above multinationals in order to secure top talent, but the gap decreased in 2014, with a number of leading regional banks growing their reputation and financial performance and therefore their ability to attract leading talent at a slightly lower rate.

The shortage of local talent may in any case ease somewhat next year. Bonuses are likely to fall short of expectations at many leading banks and a lot of risk professionals may feel undervalued in terms of the effort they have put in over the past year and therefore may seek a change.

Meanwhile there is still a need to recruit top tier talent from overseas within areas such as analytics. Most of the demand is currently focused

on credit and operational risk and control, with Basel specialists particularly sought after. The main sources of this talent are the UK and Ireland, mainland Europe, North America and various financial centres in APAC.

“The Middle East is a region where face to face and online networking will greatly enhance a candidate’s prospects,” says Graves. “I would therefore advise leading risk professionals to make themselves visible on LinkedIn with a fully updated profile, and to look out for, and attend, networking events such as the Risk Middle East Summit 2015.

SHORTAGE OF LOCAL TALENT

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SALARIES & BENEFITS

We did not report significant salary growth in 2014.

In the UK financial services sector the recruitment of risk professionals is very much driven by regulations, with high profile failures, fines and political risks focusing minds. However, there is a downside, as observed by Sam Turner, Manager of Risk Contract at Morgan McKinley UK: “Regulation-driven growth often pulls budget from elsewhere and does not increase overall recruitment. It merely changes the focus.” There is a very good availability of mid-level candidates at the moment and this can lead to frustration as hiring managers will often procrastinate, hoping that the ideal candidate will appear long into the recruitment process. “Compliance issues can also present an obstacle to rapid on-boarding. A recent example was an international bank that declined to pass a candidate’s referencing pack because he had an

outstanding phone bill. Sorting this out added a further three weeks to the hiring process,” says Turner.

However, financial services companies are encountering more difficulties in finding assistant vice president and vice president level candidates who have both solid technical skills and excellent regulatory knowledge. “Some banks will turn to overseas sources of talent, in particular mainland Europe, India and China,” says Turner.

We have witnessed an unexpected fall in the demand for operational risk specialists in recent months. The focus has been on credit, market and regulatory risk. “Candidates need to gain as much regulatory experience as possible to put

themselves in a strong position,” says Karl Alliban, Senior Consultant, Operational Risk, Governance and Internal Controls at Morgan McKinley UK. The focus is moving towards technical competence and getting up to speed on regulations such as ICAAP, ILAA, EMIR and Dodd Frank. “In 2015 the ability to automate processes, save costs and manage Basel Pillar 2 capital will also be major features in a changing risk discipline,” adds Turner.

Many risk professionals are reluctant to move as the prospects of getting a substantial pay increase are not great at the moment. “Moreover, if hiring organisations do not make a reasonable offer they are likely to lose out to a buy-back or a competitor,” says Alliban.

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Regulation-driven growth often only pulls budget from elsewhere.

RISK DISCIPLINE BECOMING MORE TECHNICALLY FOCUSED

UNITED KINGDOM

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SALARIES & BENEFITS

Salaries are likely to improve slightly as the market is improving and there will be higher demand. Perhaps in the order of 5-10’%.

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GLOBAL TREND REPORT RISK

2015