The complexity of today’s business landscape, from a global pandemic, supply chain disruptions, cyber attacks, to name but a few, are some of the main contributors to organizational risk exposure. But, with great complexity opportunities abound; and they are certainly exuberant for risk management professionals who are in higher demand than ever before. Our specialist risk management recruiters have revealed their latest thinking on the major talent trends impacting the industry, as well as the wider market at large.
Matthew Stehl, Vice President at Selby Jennings
"In the market risk industry, we have witnessed a tug-of-war between the banks, hedge funds, trading firms, and financial technology firms to attract and retain business-critical talent across market risk, model validation, or any model development verticals. Due to rampant hiring activity across hedge funds and asset managers, we are seeing candidates move easily from the sell-side to the buy-side, subsequently making it more difficult for the banks to secure talent. Hedge funds and crypto trading firms therefore amplified their risk hiring strategy, which is perhaps indicative of market volatility and investors building out these teams to protect their downside.
A trend that has emerged in quantitative risk is FRTB’s, which has driven hiring activity for market risk modelling in the banks. In the derivative pricing model validation space, we’ve witnessed many candidates at the VP and Associate level being swooped up by the front office, resulting in firms finding themselves in a highly constrictive talent pool. On the back of many asset managers and reinsurance firms pumping investments into illiquid products, commercial real estate, and renewable energy, there’s been an appetite for talent with competency in private credit exposure.
A lot of macro hedge funds are enlarging their teams and hiring Chief Risk Officers in abundance. With exponential growth and an acceleration in revenues across hedge funds and crypto firms alike, Risk Managers are in higher demand than ever before. We observed several crypto and fintech firms poach quants and risk talent on the analytical and development side. Today, talent have a plethora of options available and with new risk entrants constantly popping up in the market, competition for industry-leading professionals is heating up, thus we recommend to overhire because of the likelihood of high turnover."
Operational & enterprise risk
Khalid Figueira-Basheer, Principal Consultant at Selby Jennings
"In operational risk, interestingly, hiring activity has increased at the first line. Historically, where professionals move from audit to the second line, now a lot of firms are embedding candidates into the business and upskilling them to the second line. As the banks accelerate their market share in consumer lending, with a whole suite of sophisticated products currently being released into the market, many firms are jostling for well-versed risk candidates that better understand these subject matters. In this area, salaries have been driven up at least 7-10% over the past 2 years, perhaps reflective of the scarcity of talent.
On the enterprise risk side, some banks have been confronted with a lot of regulatory scrutiny, specifically on high profile concentre orders. Many firms are proactively building out their enterprise risk management teams to better define risk strategies and governance structures. In the current market, a large portion of banks are going through rapid transformation by restructuring their teams and overhauling first line of controls. Against this context, operational risk talent with a project managing background to analyse the function, put a plan in place, and spearhead the process, are a premium in the market."
Brendan Ferguson, Vice President at Selby Jennings
"In a market that’s driven by both regulation and economic volatility, risk management is at the forefront of all hiring needs. During the onset of the global pandemic, many fintechs took market share, but today the banks are reversing this trend by scaling operations and offering more stability, better rewards, and lucrative payment structures. We’ve noticed several banking conglomerates merge with smaller companies, not only to take over their portfolios, but to expedite the process of hiring, which has resulted in a talent surge on the first and second line.
Talent acquisition endeavours in consumer credit risk took centre stage this year. Across the credit risk lifecycle, market analytics, acquisitions, and portfolio management have driven a huge uptick in headcount. The point of sale (POS) space is equally as hot, with many firms looking to secure candidates that have a strong acumen in analytics and strategy components. With the proliferation of emerging technologies, fraud risk – particularly account takeover – is growing aggressively, and we expect a massive push in this vertical to sustain into 2023. AI and machine learning offers huge growth potential for model validation and risk, with a large demand for professionals across the executive level. We’re therefore instructing our clients to adopt a high degree of flexibility in their business models, especially in a candidate-driven market, as this offers the best chance to attract and retain talent."
Risk management talent insights
Compensation is king
Across the board, compensation is at an all-time high. Today, it’s simply not enough to give candidates making lateral moves a 10% pay increase; largely a result of counteroffers which are intensifying competition. Thus, we are advising businesses to open their wallets and offer at least a 20% increase to avoid mission-critical talent being counteroffered. For clients, we recommend working out what’s being offered in the market, or use a talent specialist, such as Selby Jennings, to make peer comparisons and stay ahead of the curve.
What job titles are in high demand?
In market risk, professionals with varied levels of experience across the buy and sell-side are a hot commodity, with banks simultaneously increasing base salaries to secure this cohort. Looking at the buy-side, in-demand professionals that top the list attain technical fluency in factor modelling and research. Professionals that can create hedging strategies and look at risk from an offensive-minded approach are widely sought after. Hedge funds are mostly looking for professionals covering quant strategies, systematic equities, stat arb, volatility strategies, and systematic credit. In credit rates, professionals with an understanding of pricing models on the exotic derivates side and competency in hard mathematics and statistical calculus are in top demand.
For operational risk, whilst previously individuals that could assess and manage risk were widely sought after, businesses require talent that can implement a holistic risk framework, driving solutions down to the root cause and mitigating firms falling foul of regulatory pressures. In terms of specific skillsets, we’ve seen a variety of firms hire risk and controls for project finance, with most typically stealing talent from private equity and buy-side real estate firms. In addition, the algo and electronic trading market has gone from strength to strength, so most banks are searching for talent with an electronic trading controls background.
On the consumer lending side in credit risk, professionals with 8-10 years of experience are commanding around a 300k base range. Within data analytics specifically, most banks are looking for industry-leading talent in the 5-8 years of experience range to scale up their portfolios. On the wholesale and model development front, corporate lending, leverage finance, counterparty credit risk roles, and hedge fund credit risks are highly desirable. Middle market corporate, underwriting, and portfolio management roles have seen a notable uptick, particularly across middle market M&A and leverage finance transactions.
Geographical hot areas in the spotlight
On the market risk side, we’ve been helping banks flesh out their teams in lower cost of living areas. Currently, there’s a bank-wide trend to move risk and second line roles to Dallas, which poses a challenge for businesses to relocate talented individuals from New York. On the buy-side, New York, Chicago, and the West Coast are desirable destinations. Additionally, Austin, Texas bucked the biggest growth trend with hedge funds setting up shop there; a major satellite trading and hedge fund district that is home to an exuberant tech talent pool.
In operational & enterprise risk verticals, the hottest markets are New York, Dallas, Tampa, Charlotte, Baltimore, and Wilmington in Delaware. The consumer lending space has frankly taken off in Dallas; a lot of clients have expanded their ERM and operational risk teams to plug first and second line roles. Looking at credit risk jobs, the hiring hubs mirror operational risk, with the only significant difference being Phoenix; perhaps reflective of companies opening regional offices there and candidates attracted to a region with no income taxes.