The global risk consulting market is estimated to be worth $70 billion dollars with UK analyst firm, Source Global Research estimating that it could reach $80 billion by 2020. The growth of $30 billion in just five years is unsurprising given the current economic and political landscape.
With continuous waves of regulation, advancing cyber threats, the uncertainty of Brexit and global trade disputes, companies are seeking the right expertise to protect themselves from what could be very damaging consequences both financially and for their reputations.
PWC’s latest Annual Global CEO Survey found that the top threats concerning CEOs in 2019 are; over-regulation, policy uncertainty, availability of key skills, trade conflicts and cyber threats. Policy uncertainty and trade conflicts are new entrants for 2019 while issues such as terrorism and increasing tax burdens have crashed out of the top 10.
Agility is key for adapting to this change and a big part of this is being able to bring in the right talent to address issues as they arise. Consulting gives firms quick access to specialist skills and expertise without adding to headcount and provides the flexibility of being able to swap in and out capabilities as projects come to an end and new matters come to the fore.
The key risk consulting trends we have seen are:
We’re seeing an increase in requirements for risk expertise on the buy-side. Buy-side firms haven’t historically been under the same intensity of regulatory scrutiny as the sell-side but there is now a notable shift.
Stress testing across the board
New models and processes are having to be implemented and updated all the time and they all need validating. Testing individual methods doesn’t need to be done continuously and therefore doesn’t require a full time, permanent role. Consultants are perfect for coming in to test these, see how they react, offer advice and move on.
For most firms FRTB and Brexit plans are well under way. We may see a spike in consultants checking and refining the work as the FRTB deadline approaches next year and more becomes clear around Brexit. For now consultants are being used to review and update ICAAP and ILAAP.
Regulators often advise companies to instruct consultants for their expertise and firms are happy to comply to show that they are taking the guidance seriously.
FinTech companies are developing quickly and often faster than regulation. While this leaves them unconstrained, it also leaves them vulnerable without guidance and protection.
Smart companies are wanting risk expertise to help protect them from their unpredictable environment whilst regulation catches up.
A rapidly growing part of risk management is harnessing innovation and developing the use of technology. While digitisation, data migration, the cloud, AI, machine learning and robotics all offer operational advancements and efficiencies, they can create disruption and heighten cyber risk. Cyber security is thought to be the biggest risk management service, worth an estimated $15 billion.
More than ever it is desirable for risk professionals to have cyber, technological or quantitative experience. Consultants are being used for this expertise where there are gaps in securing permanent staff with this highly sought after mix of skills.
2019 is going to be challenging with it’s unpredictability but this environment creates opportunities in the risk market for those whose aim is to create security and stability. Agile and forward thinking companies will see that sometimes this means extending beyond their own internal capabilities and bringing in new expertise with contractors.
Below is a sample of contractor profiles who are ready to come into companies and assist with a direct need.
Risk Professionals – Available Immediately
Market Risk Model Validation Quant
Top Tier Investment Bank
Validation of VaR and sVaR models
Market risk model review for product layer and simulation layer for all asset classes
Knowledge of products across asset classes Equity, IR, FX, Commodity
Technical Skills: Python, C++, VBA, Excel, SQL, Matlab
£750 per day + mark up + VAT
Senior Interim Risk Manager
Insurance & Banking sector
Revising Risk frameworks – ICAAP specialist, development of ILAAP
Advises on Market, Credit, Liquidity, Operational and Regulatory Risk
Held previous CRO roles before turning to contracting/consulting work
£900 per day + mark up + VAT
Interim Head of Risk
Retail & Investment Banking
Skilled person review of Equity release and Treasury services
Implementation of a new framework for a key banking client
Implemented new internal fraud controls and financial crime framework (policy, reporting, governance and controls).
BREXIT Scenario modelling and Board reporting on risk topics
£1000 – £1500 per day + mark up +VAT
Operational Risk Manager
Implementation of the EUC policy and procedures
Development and implementation of the EUC inventory
Implementation of Operational Risk Assessment Actions
£500 per day + mark up +VAT