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Risk management market and salary survey 2008




                            Credit and Risk People
                             Search and Selection
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
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
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
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
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
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
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
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
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
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
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
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
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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Risk Review 2008

  • 1. Risk management market and salary survey 2008 Credit and Risk People Search and Selection
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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