As a risk specialist, you will understand the need to manage risks so that their potential to cause harm is minimised without destroying the enormous benefits that risk-taking can deliver. In very few other sectors is the value of effective risk management greater than in financial services. As recent history has shown, underestimating the need for robust financial risk management can have disastrous and long-lasting effects. And in almost no other sector is risk management required to be so complex, sophisticated and adaptable.
For our client base of financial services organisations – from large universal banks operating globally to boutique, single strategy hedge funds – the need for the highest quality risk specialists does not diminish. So if you are a skilled and experienced financial risk specialist, whether working in credit, market, operational or associated discipline, our clients would like to talk to you about their permanent or interim requirements.
Top Tier American Bank
Top Tier Bank
Large Retail Bank
Treasury & Capital Risk, Investment Bank
Tier 1 investment Bank
Top Tier American Bank
Top Tier Bank
Large Retail Bank
Treasury & Capital Risk, Investment Bank
Tier 1 investment Bank
We want to talk to you. Drop us a line and tell us about yourself!
The Fundamental Review of the Trading Book (FRTB) has been a long time coming. However, it is thought that the European Commission will introduce legislation to trigger a three-year implementation period starting in 2021. With the FRTB finally approaching, now is a good time to review attitudes towards FRTB, and how organisations are preparing.
After the 2008 credit crisis, the Basel Committee on Banking Supervision (BCBS) extended and refined banking standards by creating the Basel III regulation, which includes the FRTB. The FRTB’s primary purpose is to better prepare financial institutions for periods of uncertainty by improving the calculations used to estimate the capital required to cope with losses from market risk.
One of the key changes is to create a more objective boundary between the banking book and trading book — intending to reduce the incentive to arbitrage between them. Other changes include a revised standardised approach that encourages greater reliance on risk sensitivities as inputs into capital charge calculations, and a revised internal model approach that replaces value-at-risk with expected shortfall.
The number one complaint about FRTB is the cost. Banks have expressed concern about the amount of capital they will be required to hold, the complexity of the regulations, and the additional staff needed to ensure compliance. The Basel Committee has made several amendments to FRTB since its initial proposal in order to reduce the financial pressure on organisations. However, the financial and logistical challenges of implementing FRTB should not be understated.
Despite this, it is also important to recognise the opportunities FRTB offers. Banks that fully embrace FRTB have the chance to rebuild modelling approaches using tools such as big data, analytics, cloud technology and data science. This could provide a competitive edge and offset increased costs of compliance. For example, the FRTB requires enormous amounts of data, which could also be used to improve fraud detection and trend spotting.
While there are a few banks whose existing infrastructure (i.e. those with bespoke and integrated trading and risk platforms built with advanced technology) facilitates the move to FRTB, for most organisations preparations are extensive. However, despite the pandemic, preparations for FRTB are still going strong. According to Risk.net’s conversation with Bloomberg’s Essan Soobratty, ‘banks have mostly continued along their established pre-Covid trajectories.’ And while there have been some inevitable delays, some banks are even viewing the current situation as an ‘opportunity to continue at a pace that allows for a more strategic implementation.’
These more strategic banks are viewing FRTB as an opportunity to improve their entire risk platform. For example, a key priority includes assessing and upgrading computing and operational systems to support the tasks that will be necessary to comply with FRTB (e.g. P&L testing, expected shortfall and sensitivity analysis). In addition, FRTB requires an unprecedented level of integration across departments. This means that banks are having to re-align roles and responsibilities across Risk, Finance and Trading, and co-ordinate FRTB implementation with other programs (such as BCBS 239) to achieve holistic transformation. This approach is likely to provide long term-gains and avoid the situation of the new system, which has been built on different data and models, conflicting with the existing one.
Alternatively, many banks are considering third party platform and data vendors. With the number of infrastructure solutions on offer and the FRTB move towards increased standardisation, McKinsey & Co have suggested that it makes sense for banks to buy in certain solutions while building only the aspects of their infrastructure that provides a competitive advantage.
Clearly, a bank’s approach to FRTB preparations will depend on existing infrastructure, size and culture. However, more and more banks are using the delay caused by Covid-19 to implement deeper structural change. While it may make sense to outsource certain processes, investing in new technology and committing to the integrated culture required by FRTB establishes an organisation as a bank of the future.
Several major employers, such as Twitter and Facebook, have announced that remote work will continue indefinitely. For those who enjoy the flexibility and lack of commute that working from home offers, this will be welcome news. For others who thrive in an office environment or who lack a suitable home-working space, a remote future could be a nightmare. There are also growing concerns about what remote work will mean for training, teamwork and sustaining company culture.
The hybrid office is being touted as a solution, where employees split their week between their home and the physical office space. However, this comes with its own set of problems. For example, there is concern over a two-tier system arising between office and home workers, and a possible breakdown in communication as a result. Luckily, there are a number of innovative new technologies being designed — could they help build a hybrid office that people want to be part of?
One of these new technologies is Yonderdesk, a custom digital workspace. One of the main issues with a hybrid office is that it lacks the ‘sense of togetherness’ created by physically being in the same space. This means employees miss out on socialising and are less likely to ask their colleagues quick queries. Yonderdesk is a digital floor plan that can mimic the organisation’s actual office space. Employees are given an avatar and a desk, so that it’s easy to see where your colleagues are at (e.g., in meetings, available or working on a task). Digital floor plans have been a key element of online games, such as Habbo, for years because they are fun, engaging and make people feel like they are having a shared experience, so it will be fascinating to see whether ideas like Yonderdesk prove popular.
On a more tech-heavy futuristic note, there is plenty of development in virtual and augmented reality technology. Digital start-up, Spatial, are working on augmented reality filters that create the illusion that your co-worker is right in front of you (similar to Pokemon Go). The avatar has facial expressions and can even sit down on a chair. It also works on existing virtual reality headsets, but Spatial are particularly excited by the idea of lightweight glasses, which are likely to be far more practical for everyday use. In addition, Spatial allows your avatar to interact with virtual tools. In their words, ‘Your room is your monitor, your hands are the mouse.’ There are plenty of other virtual reality meeting applications, such as the ones on this list, but Spatial is one of the most immersive.
A more controversial development is the increase of monitoring software, sometimes known as ‘Tattleware’. Some of these products can be used without employee knowledge to spy on emails, software use and more, which can have serious data privacy implications and undermine trust. Given that, on average, people have been working longer hours during the pandemic, it seems unwise to use monitoring software in this way. However, when used ethically and transparently, such tools can provide a rich understanding of employee behaviour that can improve productivity, engagement and prevent fatigue and/or burnout. For example, software like Time Doctor has time-tracking features that can help employees and managers gain a better understanding of how long tasks actually take, which can be fed into future estimates and used to reshuffle schedules.
Last but not least, collaboration tools. If you haven’t done this already, finding and implementing effective collaboration tools is vital to successful remote and hybrid working. You are probably most familiar with services like Slack — instant messaging chat rooms are a great way for employees to show their availability and engage in more casual conversations. Take this further with tools like Donut, a slack channel that makes introductions with a random employee every couple of weeks and encourages virtual or in-person meet-ups. This helps build a cohesive company culture by structuring those random encounters from the pre-pandemic days.
Clearly, it will take time to build a hybrid office that suits your organisation. Exploring new tools is a great way to avoid complacency and ensure the hybrid office experience is something your employees want to be part of.
We surveyed more than 1,500 employers to gather data on current hiring trends, the use of the job retention scheme (furlough), the return to home working, skills in demand and the impact the global pandemic is having on salaries and rates. We are pleased to be able to present the results for November below:
McGregor Boyall are pleased to welcome Tamryn George as Principal Consultant for Risk Management & Quantitative Analytics.
George has over 8 years’ experience as a specialist Recruiter in Risk Management and Quantitative Analytics in South Africa. She has an extensive and successful track record of placing qualified Risk Professionals within Retail, Corporate & Investment Banking, Advisory and niche Financial Services. Tamryn’s career progressed quickly as she was instantly recognised as a Top Recruiter from both her candidates and network of clients.
Commenting on her appointment George said, “Since moving to London, I’ve been looking for a well-established firm with a strong reputation in the market. A firm that offers a professional working environment and an opportunity to collaborate with other successful teams. Since my first initial engagement with McGregor-Boyall I quickly realised that they ticked all these boxes, offering so much more!”
“It’s truly refreshing to be able to welcome on board Tamryn, a highly experienced recruitment professional with extensive Risk Management knowledge across all levels and disciplines” said Chris Mensah, Associate Director for Risk Management and Quantitative Analytics. “In what is a particularly difficult market, Tamryn has a wide range of expertise gained over the years in different economic markets and international locations, which I am sure our clients will benefit from. Longer term I’m confident this investment in the Team will ensure we can continue to build and strengthen our relationships with clients.”
“In what has been an extremely tough period, it is great to be talking about positive changes” added Lucy Frost, Group People Director. “Tamryn had accepted our offer before lockdown, and like most firms we have had to navigate through lots of challenges over the past three months. However together we worked out a plan to get her into the business but in a flexible manner that worked for both parties. I am sure she will be an asset to the firm.”
Our Risk, Finance & Compliance Market Insights Report & Salary Guide 2020 provides the latest insights on the market collated by our specialist Risk, Fiance & Compliance Recruitment Teams, and from data collected from surveying our clients and candidates.
Our Scotland Salary Guide 2019 provides the latest salary data collated by our specialist Recruitment Teams covering:
Despite being under threat from the growing influence of compliance, a good risk manager is still an invaluable asset to any forward-thinking business.
Why bother with risk management? Most people are trustworthy, no one leaks data and the worst probably won’t happen. You might as well put your energy into worrying about something more fun, like a new blend for the coffee machine or an office dog.
If that sounds naive (stupid, even), that’s because it is. Risk management is a crucial part of any forward-looking business. When you add in how fast regulation is changing and the turbulence of current markets, it makes it even more important to get your house in order.
The changing face of risk
A risk manager’s role is self-explanatory – they identify and assess threats to a business. These threats can come from anywhere: financial uncertainty, legal liabilities, management errors, accidents and even natural disasters. In some ways they need to see the future, and in the rare event they miss something, at least be able to quickly adapt to and limit any negative implications.
The role had changed significantly over the past 10 years or so. Whereas before the focus was very much internal, concentrating more on financial risks to companies, nowadays they spend more time looking outward. Liquidity, operational, compliance, regulatory and reputational risks now form a large part of the job.
IT security threats and data risks are also a much bigger issue, especially in light of GDPR. A risk manager’s skills need to be varied.
Risk of compliance
The rising role of compliance is a risk to risk itself. With compliance teams growing in reaction to increasing legislation and harsh penalties if rules aren’t followed, the authority and budget of risk managers have started to suffer.
Many CEOs would rather focus on ensuring they maintain the status quo whatever happens, rather than on the uncertainty of what might happen when it breaks.
The risk manager’s traditional toolkit has also been undermined by unpredictable and hard-to-model factors like Brexit, which had a huge impact on currencies, or government policies on renewable energy, which have had a big impact on the way energy is traded.
Hire the best risk manager
Often the role of risk management is left to the employee who wears the most hats, but as your company grows, your assets do too, and this approach just won’t cut it.
A risk manager doesn’t have to be exceptional with numbers, but it helps. Quantitative risk management is important – your risk manager needs to know their way around a spreadsheet – but qualitative and communication skills are arguably even more so.
Spyros Maragos, manager of risk analytics at US-based Direct Energy, says: ‘You have to ask the right questions – that is a trait of good risk managers. You need to be able to explain the numbers to management and have an understanding as to what impact market changes have on the company P&L.’
The perfect risk manager is a good communicator, able to explain complex problems to the most high-level executive, but also a maths and computer programming prodigy. They may sound rarer than hen’s teeth but they’re out there, and once you find one, you shouldn’t let go. You can’t risk it.
Our England Regions Salary Guide 2019 provides the latest salary data collated by our specialist Recruitment Teams covering:
Our Compliance, Finance / Audit, Financial Crime, Legal & Risk Market Insights Report & Salary Guide 2019 provides the latest insights on the market collated by our RFCL Recruitment Team, and from data collected from surveying our clients and candidates.