It's been a good year for risk specialists. The gurus of disaster prediction and mitigation are back in fashion, and they can earn sizeable premiums applying their talents in industry hot spots.
Recruiters globally report robust demand for risk experts across the three main areas of the profession: credit risk, market risk and operational risk. It doesn't take a PhD in quantitative techniques to understand why. European corporate lending rose 46% to $838bn in the first nine months of 2005. During the same period, the value of the global credit derivatives market rose 48% to $12.4 trillion, and the 2007 deadline for Basel II, with its heightened emphasis on operational risk, is fast approaching.
"Risk hiring is buoyant," reports Adrian Marples, a risk specialist at executive search firm Sheffield Haworth in London, "After strong hiring in 2004, there was little activity at the start of the year, and the summer was quiet. But banks are now gearing up to start hiring again as soon as bonuses are paid in 2006."
UK: Financial institutions risk analysts wanted
Vice president (VP)-level risk specialists who build complex financial models assessing the downside of trading credit derivative products, can earn base salaries of 85,000 plus a 100% bonus in London, according to Marples. "There's continuing strong demand for market risk candidates with a strong knowledge of structured credit products," he says.
Hedge funds in the City of London are also hiring. Permal Investment Management and Optimal Investment Services have both added risk specialists in recent months.
However, Marples says one of the hottest risk profiles in London currently is for credit risk analysts working for investment banks and analysing hedge funds. Banks are looking for proactive analysts who can assess the risk of doing business with potentially nefarious funds, says Marples. It's a specialist skill set, and one that can command a premium of around 10% over standard credit risk analysis pay packages.
US: Prime brokers beefing up
Hedge funds are also driving risk hiring on Wall Street.
"One of the biggest growth areas for risk hiring is prime brokerage divisions in investment banks," says Michael Woodrow, president of search firm Risk Talent Associates. "Prime brokers need a combination of credit and market risk skills - they're lending to hedge funds and need to analyse the credit risk of doing so, but they also need to analyse the risk that the markets will get the hedge funds into trouble."
Woodrow says heads of prime brokerage risk can earn $700,000, plus; mid-level VPs are on $350,000. "Prime brokers are so profitable they can pay whatever's necessary," he says.
France, Germany, Switzerland: Quants and operational risk specialists sought
Hedge funds are absent from the hiring equations in continental Europe. French banks are looking for quantitatively-focused market risk specialists who can build and validate mathematical models according to Gerome Bonnard of specialist finance recruiter RCBF Consulting. By comparison, he says demand for credit risk and operational risk specialists is poor: "There is a glut of people."
This stands in contrast to Germany and Switzerland, where operational risk is top of the agenda. "Most of the jobs right now are in operational risk," says Natalie Jouan in the Frankfurt office of Michael Page. "German banks like Deutsche Bank, Commerzbank and Dresdner are adding staff because of Basel II."
"Operational risk is the general focus now," says Ivano Coni at Coni + Partner Executive Search in Zürich. "UBS has just finished building an entire operational risk division."
Operational risk specialists working in Frankfurt can earn a salary of €75,000, plus a bonus of 10% to 20%, says Jouan. Similar positions in Zürich pay up to €90,000, with a 15% bonus, according to Coni.
Italy: Insurers readying to recruit
Giorgio Veronelli, executive manager of Michael Page in Milan, says Italy's insurance companies will be front of the queue for risk management specialists in 2006. Regulatory changes imposed by Italy's insurance association, ISVAP (Istituto per la Vigilanza Sulle Assicurazioni Private E Di Interesse Collettivo), are set to focus insurers' attention on risk issues, says Veronelli: "We expect to see a lot more risk management jobs in insurance companies from January."
The bad news is that risk pay in Italy lags behind Europe's other major financial centres. According to Veronelli, a risk manager with five years' experience will be lucky to earn more than €100,000 (67,000, $119,000) in Milan. In London, Marples says a similarly qualified person can earn more than twice as much.