While risk managers may have gained influence and job security compared with other corporate departments, their compensation prospects for the current and coming year are hardly rosy.
Insiders and executive recruiters report expectations are low for bonuses for mid- to senior-level professionals in all areas of risk management, including operations, credit and market risk. What's more, new hires aren't garnering the same robust packages they might have a year ago.
"To some extent, risk management has a counter-cyclical element, so there is more job safety and even new opportunities in a market like this," says Gene Starr, president of E.D. Starr, an executive recruiting firm based in New York. "Risk management is going to be one of the last areas where a firm cuts corners, but where firms are going out of business we're seeing risk management people out on the street."
More supply than demand, coupled with dismal financial performance at most Wall Street firms, is taking its toll on compensation in the sector. For risk management professionals who have jobs, Starr says managing bonus expectations is key. While he sees a number of individuals "in denial," others are well aware their total compensation will be low compared with past years.
"I'll be shocked if we get bonuses that are even 50 percent of last year's," says a risk management professional in the operations area of a large, well known Wall Street firm. "It's bad but, frankly, I feel lucky to have a job in this market."
Focus on Job Security, Not Money
"No institutions are going to have a great year," Starr points out. "Some may be okay, but few people are anticipating hefty bonuses. That's just unrealistic." In this environment, he advises risk managers to focus on keeping their jobs rather than fighting for a larger bonus, a move which he says "could backfire."
For positions such as senior credit risk portfolio manager, compensation packages have traditionally been all over the board, says Starr. Depending on the firm, the size of the operation and the culture, salaries could range from $150,000 to $200,000, with bonus potential ranging from 25 percent to 150 percent. This year, he says, bonuses could be at the low end of the range. For more senior positions, such as a head of operations risk, bonuses could be depressed simply because of a firm's bleak financial performance.
For new hires, packages have been trimmed and there is less room for negotiation. "We're not seeing guaranteed bonuses when a person changes jobs," Starr reports. "And while signing bonuses exist, firms are being a lot more careful with their dollars and cents."
No More Buyouts or Counter Offers
Equity buyouts for new hires are also disappearing. Traditionally, senior level professionals with equity in their firm would have been offered a buyout, but now that those assets are of questionable value, the chances of a receiving any compensation to make up for the loss of equity are slim.
In the last six months, Starr has also seen a significant change in firms making counter offers to employees who are recruited away. "Back in 2007, every offer was aggressively counter-offered because firms did not want risk management people to go," he says. "They broke salary and compensation bands to retain people." Unfortunately, those individuals with higher-than-usual salaries are often first on the chopping block when the time comes for layoffs. In 2008, Starr isn't seeing counter offers.
Starr has advice for both job seekers and professionals currently working in the risk management arena. "In this environment, don't focus on the money. Focus on career growth and career responsibilities." He emphasizes that now is the time to concentrate on acquiring and developing new skills.
If you're looking for a new position, concentrate on finding a stable institution where you can develop. "The money will come as the market starts to turn around," he says.