2017 has been a big year for Risk and ever increasing regulation and regulatory change continues to drive hiring across all disciplines of Risk Management.
Our Associate Partner and Head of Risk and Quant Practice Ruaridh Brown-Hovelt has extensive experience in recruitment across Credit, Market and Quant Risk as well as Regulatory and Operational Risk. Here he shares his thoughts on some of the growth areas and the impact this will have on recruitment.
There are several key factors we are seeing driving hiring requirements including Full Review Trading Book, General Data Protection Regulation and Cyber Risk and of course, we brace ourselves for the impact Brexit will have.
Data data data…
By addressing how banks record and estimate risk FRTB will force them to be more innovative with their internal models, close the net on tail risk and tackle loop-holes between banking and trading books. While banks are taking this very seriously, we have yet to see quite the level of associated recruitment many expected and anticipate this will start to come through next year.
One area where requirements have become very apparent is Non-Modellable Risk Factors (NMRF). This is due to the sheer volume of work required, the inherent capital costs and the complexity of work needed in attempting to control the seemingly uncontrollable. This will continue to increase resource requirements as the deadline (2022 but with a year of backtesting required ahead of that) for model approval moving to the desks gets ever nearer. A key requirement for a number of our clients is for more balanced quantitative profiles with experience of working with large data sets, and ideally AI/Machine Learning balanced with a knowledge of market risk and inherent regulations.
In addition, and also as a result of FRTB, we are seeing a continued requirement for expertise in risk frameworks and roll out processes.
Data has wider ramifications for hiring across Risk with the approach of GDPR. In a time where protection against some of the eye-watering financial penalties can affect bank’s bottom lines as much as their revenue generation, GDPR is more important than ever.
A key effect on Risk hiring relates to strengthening 3rd party, outsourcing and vendor risk. Firms will be responsible for ‘passed on’ data and ensuring that those third parties are also compliant.
Operational Risk and Cyber Risk
The recent stress test results demonstrate the ever increasing importance of managing non-financial risks for banks. As most banks capital positions generally appear to be in a more acceptable place, the onus is now more on industry change and how it impacts on operational models. Operational Risk will continue to be a key area in the competition for talent with demand expanding beyond the recent focus which has been more around expertise on frameworks. There will continue to be a need for candidates with first line Risk experience for markets focused Operational Risk roles, where an understanding of the products and Risk from a business perspective trumps traditional Operational Risk experience.
All too often cyber-attacks and data leaks hit the headlines. It’s not only financial services under threat, we’ve recently seen high profiles cases with well-known brands such as the NHS, Tesco Bank, Uber, Yahoo, BUPA and Three. With cyber-attacks doubling at the start of 2017, the problem isn’t going away. The predicament only evolves as the growth of our reliance on all things digital collides with the growth of the intensity and sophistication of the threats.
There is a need to strengthen the operational framework, not just the technical. To manage the risk, banks need technical teams that are smarter and faster than the criminal’s as they attempt to stay one step ahead. Smart banks are adding a second layer of protection by preparing to accept and transfer the risk. They accept that there may be an outcome where they can’t keep their ‘front door’ secure and engage another area of risk to source suitable insurance policies.
All of these areas require firms to become more innovative in their approach to Risk Management and Processes. AI and Machine Learning techniques and harnessing advances in technology are key to achieving this.
We know there is a wave of Programmers, Quant Specialists and Data Scientists coming from our universities but knowing your way around algorithms and data isn’t always enough for the crucial roles born from Risk Management. Proven ability of applying AI and Machine Learning techniques in a practical environment and furthermore with a deeper knowledge of the Risk models and processes and the regulations themselves is where the cream of the crop lie. Such a unique skill set is a competitive space for banks, management consultancies and recruiters alike.
Beyond the banks, this is also a significant battle ground for the consultancies for both talent and market share. The continued rise of boutique consultancies offering niche and highly technical services to Risk functions at a lower client cost and with longer partner level engagement, allows opportunities for both recruiters and candidates.
These are creative roles, so we can be creative in our approach to identifying the best talent. We’re identifying suitable industries where we believe talented individuals can transition across, in particular the Fintech space and from other sectors where Non-Financial Risk is more of a focus.
And finally, Brexit…
Brexit, Brexit, Brexit. There aren’t many walks of life where this isn’t a hot topic of conversation. Our clients need to consider; how will regulation change? How will differences in regulation work in multi-national organisations, in particular with Domestic Regulation and Employment Policy? Will companies and teams move outside of the UK? Will this affect longer term off-shoring strategies? Will these countries have the talent needed? One thing is for sure, financial services firms have Brexit programmes marked as high priority and this will inevitably affect hiring. We have been preparing for this in a number of ways. One example is developing talent pools of candidates with specific skill sets who are willing to relocate to certain locations, so we can be ready to respond to recruitment needs as Brexit negotiations and firm’s responses become clearer.
As long as technology creates opportunities, it will create threats – and the need to manage Risk. The speed of change is huge and there will be no end to regulation being introduced and evolving to keep pace. As long as there is Risk there will be a need for talented teams to keep our banks and investors safe and HR teams and recruitment specialists must be prepared for the increase in volume and complex layers of skills that this requires.
If you would like to discuss your Risk hiring requirements I’d be very happy to help.