Risk Review 2008

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2008 salary survey and risk market review

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Risk Review 2008

  1. 1. Risk management market and salary survey 2008 Credit and Risk People Search and Selection
  2. 2. Credit and Risk People Market Report 2008 Risk Management Contents 1 Overview 2007 Review 2008 Expectations 2 The Market Drivers Effects of the credit crunch The financial services Industry Regulatory and Government 3 Credit and Risk Peoples’ Analysis Analysis Market sectors analysis 4 2008 Market Expectations 5 Salaries in the Market Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 1 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  3. 3. Credit and Risk People Market Report 2008 Risk Management 1 Summary Welcome to the market report for March 2008 from Credit and Risk People. We hope this report will prove to be a valuable tool for our clients and other risk professionals. This report was developed after a number of requests from clients for more information as to the market situation and salaries. We have sought to report on market trends, to provide some analysis of those trends and make some predictions for the next 12 months. We have pulled together information from many sources including our professional memberships of risk bodies such as GARP, (Global Association of Risk Professionals), and PRIMA (Professional Risk Mangers International Association). We also have incorporated our own data, information from other recruiters as well as publicly available data. 2007 Review At the start of 2007 we were still involved in a booming risk market both in the UK and Globally. Salaries had risen sharply over the previous 5 years. The impact and influence of Basel II had exacerbated skill shortages and the Interim / Contract market was at an all time high. The UK and global economies continued to grow strongly up until the third quarter of 2007. In the UK the economy continued to grow above trend whilst new financial centres such as the UAE were booming and attracting experienced staff. During 2007 a number of companies had chosen to locate parts of their risk and analytical recruitment to Asian / South East Asian countries. Come the third quarter of 2007 the general perception was that that the risks to the UK / Global economy were no more than usual with one exception. Many observers had highlighted the issue of US sub prime lending, especially in the mortgage market as being potential trouble for the US and Global economies. It was, even then, not fully appreciated how these loans had been packaged and sold widely to non-US banks spreading the possible contagion far and wide across the financial services system. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 2 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  4. 4. Credit and Risk People Market Report 2008 Risk Management During 2007 nearly 1.3 million US properties were subject to foreclosure a 79% increase in comparison to 2006. In December 2007 a leading business periodical predicted US sub-prime losses to be around 300 billion US Dollars. Securitisation had led to the wide spread dispersion of the risk and by the end of 2007 early 2008 many lenders reduced their activities. This led to the first run on a UK bank, Northern Rock, in living memory. The sudden reduction of available loans led to a “credit crunch” in late 2007 which still dominates the market today, March 2008. Financial institutions have moved swiftly from an era of relatively cheap and plentiful lending practices to a highly uncertain market. Many have restricted their lending and a number of new players in the sub-prime mortgage market in the UK have closed their doors either completely or to new business. On a Governmental level five rate rises were imposed to cool the economy but by the end of 2007 there were widespread calls for interest rate cuts to assist the economy. Recruitment wise the risk market in the final quarter of 2007 was broadly similar earlier in the year. A number of companies, mostly with US parents, had initiated a recruitment freeze or in fact embarked on cost cutting measures leading to staff redundancies but few risk departments were reduced. Difficulties in assessing the impact of the credit crunch meant that the banking recruitment market in general was subdued for Q4 2007. The early part of each year after bonuses are paid and budgets are set normally leads to a wave of recruitment. The impact of the credit crunch on risk recruitment will most likely manifest itself in Q2 and Q3 2008. So far recruitment within retail financial services has been at a reduced level from Q1 2007 but clients are still strongly in the market to recruit with a number of niches such as modelling and scoring experiencing shortages in supply of candidates and upwards pressure on salary expectations. So far recruitment within retail financial services has been on a reduced level from Q1 2007 but this has been compounded by a general reluctance of candidates to switch employers in an uncertain market. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 3 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  5. 5. Credit and Risk People Market Report 2008 Risk Management 2008 Expectations Financial services recruitment awoke in early 2008 to a much more uncertain market than for at least five years. Financial services itself had grown strongly for a number of years globally and in the UK. The budget of March 2008 has led to a downward forecast of growth for the UK economy for the next two years. On top of this, a reduction in government income and a growth in government borrowing have been signalled to the markets. The level of that growth, or indeed if we will enter a recession, depends on which forecast we read. What is not argued is that we are in a period of global economic uncertainty It is reasonable to assume that employment growth will slow as the financial services industry goes through a period of consolidation. If companies are reducing their business volumes, or even exiting some markets, fewer risk management staff will be required. Client driven risk management recruitment is likely to be more subdued in 2008. On the candidate side an uncertain economic outlook leads to candidate inertia and reluctance to enter the recruitment market. This is likely to impact the numbers and quality of candidates available via traditional methods such as client led advertising and lead to a need to the use of search and selection and specialist agencies as the required method to obtain skilled staff to fill vacancies Candidate shortages are still likely to be the dominant feature of the market with vacancies taking longer to fill than previously. On a macro level the financial services industry has suffered a serious blow with many companies sustaining huge losses. Where will this leave the risk management industry? Any further reforms in corporate governance can most likely be expected to add additional requirements onto financial institutions. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 4 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  6. 6. Credit and Risk People Market Report 2008 Risk Management 2 The Market Drivers Factors affecting the recruitment market in 2007 were as follows The credit crunch The “credit crunch” had a seismic impact on the financial services industry. The widespread dispersion of credit risk and the unclear impact on financial institutions caused lenders to reduce lending activity or to make loans at higher interest rates. At the end of Q1 2008 we are still witnessesing much of the fallout and many expect there to be more surprises in store as the banks enter their reporting periods. The crunch has decimated the profits and capital bases of many banks. In the UK we have experienced the first run on a UK bank since 1866 leading to a nationalisation of the Bank itself. Northern Rock’s business model failed in the new environment of the credit crunch. Questions have been asked as to how approprite were the Bank’s internal risk assessments. The risk mangement department of the bank is significantly smaller than might be expected for such an institution which followed such an aggressive business model. The full effects of the credit crunch on employment in the financial services industry are still to be witnessed. If as previously discussed companies are reducing their business volumes or exiting some markets they will require fewer risk management staff. Long term effects may be significantly different. The most likely response to the type of losses incurred by the industry is more risk management rather than less. The financial serivces industry in the UK The underlying driver of risk management recruitment in the UK is the success of its financial services industry. The UK is one of the three biggest financial services centres in the world. The UK had £21 billion in financial experts in 2005 and finance and related companies are a major source of employment. The city is a leading world centre for finance and related services. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 5 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  7. 7. Credit and Risk People Market Report 2008 Risk Management Key areas Some of the key areas driving risk recruitment are outlined below Basel II accord Basel II, which was initially published in June 2004, added in the development of international standards that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. This rule establishes regulatory and supervisory expectations for credit risk, through the Internal Ratings Based Approach (IRB), and operational risk.The shortgage of skilled candidates will be a feature of the market in 2008. Sarbanes-Oxley Sarbanes-Oxley has imposed ongoing business requirments A number of companies have decided to use stand alone teams in this area, others fit this into operational risk teams. Many accountants are now placed within operational risk departments and these departments have ongoing requirements. Solvency II Solvency II introduces a comprehensive framework for risk management for defining required capital levels and to implement procedures to identify, measure, and manage risk levels. Often called quot;Basel for insurers,quot; Solvency II is somewhat similar to the banking regulations of Basel II and has caused a similar growth in the recruitment of risk mangement staff in insurance that Basel II caused in banking. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 6 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  8. 8. Credit and Risk People Market Report 2008 Risk Management Migration Banking is a global industry. The shortages of risk managment staff have also been a global phenomon. Many transfers are internal within companies. The transfer of staff into the UK has been a factor in helping to fill a number of vacancies in 2007. The general concensus is that there has been a significant number of people with direct risk skills or . transferable skills migrating to the UK. 2007 has seen a strong growth in a number of overseas financial centres including Dubai and China which have in our direct experience led to a small number of professionals leaving the UK to take up roles in these countries With the growth of these financial centres it is not unrealistic to sumarise that they will source experienced staff from the UK. Risk recruitment is an increasingly international market. With the expansion of the European union the UK has been an attractive destination for many professionals from the expansion countries. The general flow of candidates has been positive for the UK. Overseas candidates have also traditionally come to the UK through the Highly Skilled Migrant Visa Programme ( HSMP). This programme is now closed to candidates not legally in the UK currently. From April 2008 a new points based system came into place and is now called the Tier 1 Highly skilled worker scheme. The new scheme allows candidates to come to the UK to look for the work and should ease the process for relevant candidates. Risk recruitment in retail banking remails strong and it is probable that the underlying skill shortgages will ensure a continued role in the market for overseas candidates. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 7 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  9. 9. Credit and Risk People Market Report 2008 Risk Management 3 Analysis Overall Market Sharp drop in new vacancies The demand for risk professionals in 2007 followed the strong trends of The credit crunch impact started to affect vacancies and was 2006. The major factors in the market noticeable from Q3 onwards. The industry experienced a were increased demand, skill 30% drop in Q3 2007 compared to 5% in Q3 2006 shortages and upwards pressure on wages. Our research here includes not only our figures but the pubished research of other sector recruiters. Salary Increaes slight drop Sharp drop in candidates After a number of years of strong The phased closure of the HSMP scheme and impact of the salary growth the trend at the end of credit crunch stalled the number of new candidates. An 2007 was for risk salaries rises just overall level of decreased candidate registrations in Q4 2007 20% . and Q1 2008 seems due to candidates reluctance to enter the market under the current turbulent circumstances being Previously in 2007 the trend was for experienced increases of 23% to 24%. Overall Picture for employers Analysis For Q3 , Q4 2007 Evidence shows that the risk recruitment market peaked in Q2 2007. There has been an overall drop in Risk Managment Q3 Q4 vacancies and salary growth is at the Opening vacancies 117% 75% lowest level since 2005. New vacancies 70% 57% Although salary pressures have Closing vacancies 75% 77% slightly eased, a drop in registrations Candidates registering 129% 120% indicates a reduction of candidates Defensive registrations 7% 10% enetering the market Overall salary increase previous ½ yr 24% 22% 20% Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 8 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  10. 10. Credit and Risk People Market Report 2008 Risk Management Market Sectors With the credit crunch we have witnessed significant differences by sector in the risk recruitment market Insurance than in 2007. Insurance traditionally has employed smaller teams of risk professionals than in the banking sector. 2007 saw significant Operational risk demand in the insurance sector. A number of leading There has been strong growth in insurance firms restructured in 2007. New positions resulted operational risk for over 10 years in data analysis and validation roles becoming much more across all sectors of the financial common. services industry. The demand within investment Banking was heavily Solvency II was a major factor in increasing the number of impacted in a negative fashion. vacancies as Insurers sought to recognise their business risks and allocate capital accordingly. For the foreseable future Investment banking candidates with Solvency II experience will be in high At the start of 2007 there were a demand. significant number of vacancies for senior roles at VP levels and above. Credit Risk There continued to be a strong pattern The biggest area of risk managment is credit risk. The credit of demad exceeding supply until the crunch has led to many banks reporting significant losses, effects of the credit crunch at the end with the market expectations that other large losses are yet to of Q2 start of Q3. be fully reported. As late as March 2008 Bear Stearns suffered a run on the bank due to rumoured Sub-prime losses. Many banks immediately put their recruitment on hold and key hires were In the consumer credit markets the credit crunch has had greatly reduced. major effects. Credit is no longer as freely available as banks become more risk averse and seek to retain capital any From Q3 onwards demand in the further falls in asset values. operational risk market was frozen. Redundancies led to a rise in the These developments have impacted the credit risk number of avalable candidates to markets.Investment bank related roles have dropped higher levels than in the previous three significantly against in the structured credit areas. to four years. Shortages of candidates remain in certain areas: By the end of 2007 and early 2008 the • Retail banks seeking scorecard , portfolio analysis, market opened up with vacancies modeling and MI systems experience focused on products. The succesful • Credit analysts in lending analysis and portolio candidates usually had strong technical management in asset based lending are still in knowledge of the relevant products demand and controls. The current outlook is • Commercial and corporate banks have strong uncertain and our view is that the recruitment needs market for vacancies will be much smaller than in recent years and Basel II continues to drive the demand for candidates with candidate supply should be better. reporting , modelling and portfolio optimisation experience and there remains a consistent requirement for experienced candidates in retail or corporate lending or analytics working in credit review, audit and group risk functions. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 9 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  11. 11. Credit and Risk People Market Report 2008 Risk Management The ongoing centralisation of credit risk decisioning has seen the development of large centralised departments. The demand is now more professionals with strong analytical and numerical backgrounds . The UK graudate systems has not been able to fully supply the industrys’ requirments and many overseas candidates have helped fill the gaps. Changes to the Highly Skilled Migrants Programme added to demand from overseas financial service centres will increase the candidate shortgages. Salaries have continued to rise as the shortages of experienced credit risk managers is set to continue in 2008. Rationalisation by some banks in 2008 will have an, as of yet unknown, impact on the market. Market Risk Early 2007 saw strong demand for market risk professionals but as the credit crunch impacted in late 2007 employers lowered their requirements for staffing. With the downturn in the Investment banks market risk recruitment remains much lower than in previous quarters. Consultancies The big consultancies have well established financial risk management functions . They recruit large numbers of widey experienced risk maangers. The Big 4 especially recruited strongly during 2007 and continue to do so in 2008. Interim staff The demand for interim staff focused on Basel II and Sarbanes Oxley projects declned in 2007. Banks have moved to established functions staffed by permanent staff. As a result previously inflated contract rates have declined and a number of highly experienced contractors are returning to the permanent market. Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB 10 Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  12. 12. Credit and Risk People Market Report 2008 Risk Management Compilation of surveys Banking and Financial Services salary review March 2008 In the enclosed document we have sought to combine many of the leading market surveys and our own data to provide as comprehensive a picture as possible. The data covers; Finance and Accounting / Compliance / Risk / Internal Audit Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  13. 13. Credit and Risk People Market Report 2008 Risk Management Compilation of surveys Banking Audit CRP Michael Page PSD Barclay Simpson Hudson Salary (£,000’s) Entry level 23-30 25-30 26-30 No results 22-26 Part 26-25 26-38 35-40 - 26-34 Qualified Finalist Levl 30-40 No results 35-40 - 34-40 New 40-48 45-52 No result - 40-45 Qualified 1-3 yrs PQE 43-55 50-60 45-60 - 42-55 3-5 yrs PQE 52-70 55-70 55-75 - 50-70 5-7 yrs PQE 58-80 60-90 75-90 - 60-80 7Yrs+ PQE 73+ 80-130 90+ - 75+ Compliance CRP Michael Page PSD Barclay Simpson Hudson Salary (£,000’s) Compliance 24-35 25-45 22-26 No results 30+ Analyst KYC Analyst 26-40 - 24-40 - 35-45 MLRO 30-50 - 26-40 - 35+ KYC Senior 30-55 - 26-40 - 45-60 analyst Policy 36-50 - 35-45 - No result Manager Compliance 35-60 45-70 35-58 - 50-60 manager Head of 85+ - 90+ - 80+ MLRO Head of 80+ 60-110 90+ - 85+ compliance Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com
  14. 14. Credit and Risk People Market Report 2008 Risk Management Compilation of surveys Risk CRP Michael Page PSD Barclay Simpson Hudson Salary (£,000’s) Credit risk 22-45 To 35 23-45 35-45 30-45 Analyst Credit risk 50-75 45-65 45-75 60-80 45-90 Mgr / Asst VP Credit Risk 60+ 60+ 80+ - 90+ VP / head Quantative 25-55 35-50 Average 43 - 30-50 analyt Quantative 55-80 45-65 Average 64 - 50-80 Manager Quantative 80+ 65+ Average 112 - 80+ VP / Head Modelling 25-50 - - - 30-50 Analyst Modelling 55-75 - - - 50-100 Manager Modelling 75+ - - - 100+ VP / Head Ops Risk 25-45 30-35 Average 34 35+ 25-45 Analyst Ops Risk 50-70 45-65 Average 82 55-65 50-75 Manager Ops Risk VP 70+ 65+ Average 107 70+ 90+ / Head Credit and Risk People MWB Business Centre Styal Road Manchester M22 5XB Phone +44 (0) 161 435 6085 Email:market.research@creditandriskpeople.com

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