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Financial Services Risk Management Asia Market Outlook 2014

Financial Services Risk Management Asia Market Outlook 2014

over 4 years ago by Aquis Search

We are pleased to announce the publication of our Singapore Legal Financial Services Salary Survey 2012-2013.

INTRODUCTION

Aquis Search is pleased to present its financial services risk management market outlook and salary survey for 2014. Our aim in producing this paper is to provide guidance on current market trends, compensation levels for the Hong Kong and Singapore markets and what we expect for the forthcoming year.

Our information has been researched and collated with the help of our clients, candidates and knowledge of the marketplace. As with all surveys, the ranges represent the mainstream market view and there will be individual situations where salary levels will fall outside the ranges published here. Please use this survey as a guide. For specific market intelligence, please contact Sam Dakin, the head of our risk practice.


REVIEW OF 2013

2013 was a good year overall for the global economy, finally turning a corner in most respects. Whilst the Eurozone still struggled overall, the worst does look to be behind the region. Data from the UK and US was promising. Rates of  growth for India and China have slowed however, at just below 5% and 7.5% respectively, still in positive territory. For  Asia, with slower growth in China, the markets have remained steady.

In the banking sector revenues increased in certain markets however the sector remained competitive and finding profits in some areas still elusive. Margins overall were still very much under pressure. Banks have been positioning themselves to focus on their core markets and generate revenues from areas in which they have most competitive advantage. This has yielded benefits however,  in a year of heavy enforcement action, controlling costs has been less easy with large fines and associated  legal fees prevalent in many major banks. Adapting to the new regulatory world has also impacted costs with significantly increased compliance spend. 2013 could be seen as the year where banks repositioned themselves for  the new world ahead.

From a hiring perspective, 2013 was positive overall, especially when compared to that of preceding years. Broadly, sign off for additional headcount was more readily available although still subject to the scrutiny of sign-off, often at a global level. With higher confidence in the market, more professionals opted to make a career move in 2013 and which firms. Across the middle office hiring demand was far from evenly distributed. Compliance hiring, particularly financial crime related positions, took the forefront and no doubt restricted funds available for headcount in other areas. Finance was largely flat as was legal. Audit and risk were areas that saw additional headcount, but in limited numbers.

Amongst the hires that took place less, it seemed, were filled by internal candidates. Hires in 2011 and 2012 may have been more weighted towards replacement headcount rather than new headcount, which may have made it easier for the gap to be filled via an internal employee, particularly where there may have been headcount pressure in other locations and redistribution of staff was a positive alternative to retrenching personnel. Last year, staff moves from outside of Asia tended to be key transfers at the senior level with AVP and VP level vacancies filled from the local market. This stimulated the liquidity of the job market in Asia which had suffered in previous years with a higher number of positions being filled via internal mobility solutions.

Whilst a handful of banks stood out as being prolific hirers in certain areas, there were no particular trends to the market for 2013 in terms of which areas of banking activity or type were more active than others when it came to hiring. It was more a case of an individual bank’s circumstances rather than an industry specific trend. As an example, US banks were hiring, but with different appetites. Some European banks added headcount whilst others lost headcount. Asian and domestic banks hired with varying levels of caution and optimism. Whilst the majority of institutions had gone through restructuring exercises and changes to business model post financial crisis, not all banks were at the same point in the change process and that was obvious in the market with certain banks being able to hire with more confidence and conviction whilst others still needed to focus on cost constraints and uncertainties. In Singapore, there was further conversation around the need to hire from the local market where applicable and the parameters for employing foreign talent. 2013 was more a year of discussion in this regard with full details of the ‘Fair Consideration Framework (FCF)’ being released at the end of the year.


FORECAST FOR 2014

As the world’s economy posted improving data through last year, 2014 looks to continue in the same direction, with further recovery and truly moving on from the days of the fallout of the financial crisis. The US will be watched closely to assess the impact of the Federal Reserve’s tapering of monetary stimulation and whether repeats of 2013’s budget fiasco will be avoided. Steady and stable may be the best way to describe the year ahead. The Eurozone should continue to move in the right direction and Asia, by and large, should remain at healthy levels of economic expansion.

Following on from 2013, banks will still be feeling their way around operating in a world of new regulation. Further tough decisions may need to be made as to which markets institutions can focus on given the additional costs of compliance and capital that may be required. The larger global banks are better positioned to cope with this so it may be the smaller banks which suffer more. Perhaps we will see consolidation in the market as result. Banks will ultimately want to focus on revenues and where best to generate them. With most financial institutions restructured post financial crisis and with an improving economic environment, now is the time to create returns and value for shareholders. Costs will remain a factor and the drive for efficiencies will continue. CFO’s will be under pressure to deliver solutions to drive cost effective business models. Not all firms have realigned themselves post-crisis and those banks that ‘weathered the storm’ better post-2008 are now addressing cost issues as the competition in the market has rebalanced. This may create a strategic disadvantage for such firms potentially losing market share to those who have restructured earlier and are gaining momentum from their new structures and business models. Capital efficiency will be a key to success going forward so expect the Board to take a keener interest in risk management practices as a result. There does remain a question of how to achieve real growth in this environment, but overall, sentiment is more positive than it has been for a while.

For hiring in 2014, we don’t foresee too much difference to the behaviour of the job market in 2013. Expect further additional headcounts into most controls functions, particularly compliance and audit, and an uptick in the levels of turnover of staff.

In most areas salaries were flat through 2011 and 2012. 2013 started to see pressure on salary levels creeping back in for the areas in higher demand, as you would expect, and this will continue into 2014, perhaps being exacerbated. Pre- 2013, average increments in salaries offered had dropped to an average level of 10% – 12% and below for some areas however, through last year, this average percentage started to increase. For risk, offered salary increments of 20% on current salary came back to being the norm from a level of around 12-15% through 2012. Retention of staff in key areas will likely see increases in counter offers presented to employees attempting to resign this year, something we have seen occur more frequently in 2013.

The ‘Fair Consideration Framework’ (FCF) will start to have a noticeable impact on Singapore hiring in 2014. Firms will amend hiring practices in response, however whether it will slow the hiring process will need to be assessed. Positions paying below $12,000 per month will be most affected from a process perspective. It is unclear how this will impact the requirements on hiring for the more niche areas of risk, particularly at the senior level, but there will be a preference for suitable local hires where available. It will be interesting to watch this develop.


HIRING TRENDS IN RISK MANAGEMENT

Credit Risk

Out of all the risk disciplines, we have seen most hiring activity in 2013 from credit risk. In the year just gone we saw a healthy level of movement in the credit analyst space spurring a wave of replacement hiring, particularly for AVP and VP level positions. Furthermore, there were new headcount additions for these positions also creating more demand in the market, and generating further candidate moves midway through and late in the year. The wholesale banking market was the most active with strongest desire for credit analysts who have experience covering financial Institutions counterparties in the region. Large corporate credit analysts were also in demand. As we expected, in private banking there was demand for credit professionals as credit functions gained headcount approval for at least one new hire. By comparison though, we saw that the process length for private banking credit hires tended to take longer to finalise versus wholesale banking hires. Most credit searches were completed within two to three months for wholesale banking. The private banking hires stretched beyond this by a month or two months in some cases.

In 2014 we expect to see the same types of hiring as in 2013 but with higher levels of demand for new headcount as well as replacement hiring to backfill turnover. Hires are already underway and we anticipate the first half of the year to be a competitive space for credit talent. Pressure to move quicker on hiring will be pronounced as some firms actively reduce their time to hire to gain competitive advantage. Retention will be a priority and overdue pay increases may come in the form of counter offers to credit analysts during resignations. Expect to see promotions as part of a retention strategy too, particularly for AVP’s with significant tenure at that level.

As well as local hiring, one factor that may have a small impact on the Singapore market for credit professionals is hiring in China. As global banks struggle to attract experienced credit individuals from their competitors on the ground in Shanghai and Beijing, the candidate search pool is being widened to Hong Kong and Singapore. Hiring institutions may be offering additional incentives for individuals to make the relocation.


Market Risk

2013 was a relatively flat year for hiring in market risk as anticipated - quite a different story to the credit area. Whereas credit risk demanded additional headcount to deal with upticks in deal volume, the focus for market risk was to do more with the current resources at hand. Drives for efficiency in systems and processes were seen as a preference to increasing team sizes.

Turnover in the market itself was relatively stable. With limited hiring few people had the opportunity to move. Those institutions that hired were able to benefit from this and could drive for the best hire within budget. As a result, salary levels remained flat and the hiring process was purposefully slowed as banks focused on making the right hire.

Unless we see banks changing strategy and seeking additional headcount, market risk hiring in 2014 looks to be the same as 2013. Whilst there may be more desire for market risk analysts to move, unless opportunities are presented, turnover will remain at low volumes.

One area to potentially watch is a movement of risk professionals from global banks to Asian and domestic institutions. We have seen a handful of examples of this at a senior level last year and those moves may filter down to the AVP and VP level. With the difference in compensation between global and local banks narrowed, such a move can be compelling, especially supplemented with the opportunity to move into globally focused rather than regional or country positions.


Operational Risk

Last year was a positive year for operational risk hiring. There was continued growth and development in this space creating interesting opportunities for operational risk practitioners at all levels. The momentum of adding operational risk headcount at a junior to mid-level to expand capabilities of the function remained from the previous year. Furthermore, there were additional new headcount hires at the senior end from many institutions. Some of the smaller and mid-sized banks took to bolstering their operational risk function and this fuelled demand too.

There was a particularly high level of hiring activity for first line of defence positions. Many institutions sought in-business risk personnel to help enhance the risk culture through the organisation. This was most notably witnessed across the large and mid-sized banks as well as private banks.

With additional pressure on the use of capital and the benefits to capital planning that operational risk can provide, 2014 is set to maintain these hiring levels. Salary levels will rise, but not aggressively. Hiring for junior to mid-level ORM candidates may continue to be a challenge. With limited experienced professionals at this level, sourcing suitable profiles is often about potential rather than experience. Those candidates at this level that have operational risk experience can demand a premium on salary but there are alternative avenues if institutions are able to invest time in developing candidates with slightly less experience, perhaps from the ‘Big 4’ as an example. If prior operational risk experience is a must, expect to pay a premium to conclude the hire.

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