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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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