45% of front office MDs earn two to five times more than risk MDs. Discuss.
Senior risk professionals are empowered. These days they have their own reporting structure to the head of the business, intervene heavily in pay decisions, and can't be overruled by obnoxious traders.
They are also paid slightly more. But they are still paid a lot less than their counterparts in the front office.
Last week's banking compensation study from the Institute of International Finance and Oliver Wyman revealed that in very many cases, front office MDs are still earning many multiples more than the risk MDs who are supposed to be controlling them. In 45% of cases they are better paid to the tune of 200-500%.
And this is despite efforts to make sure risk managers' pay isn't totally eclipsed by the front office.
The report points to measures such as the appointment of Risk 'SWAT-teams' comprised of (higher paid) former traders who support the CRO or investigate risk issues on an ad hoc basis, and the rotation of front office people into risk roles..
When it comes down to it though, paltry risk pay is hardly surprising. Priya Mariannie, head of the risk practice at recruitment firm PSD Group, says total comp for a global head of risk is 300k, which is merely a front office salary for an MD at many banks these days.
Miles Kennedy, a partner in the risk management practice at PWC, says it's best to get over the terrible risk pay injustice however. "Some discrepancy's inevitable - people in risk aren't revenue generators. The real issue is how pay for people in risk and the front office is determined," he says.
