2011 | interim market reportww1.prweb.com/prfiles/2011/08/02/8689199/bs report.pdf · 06. outlook...

2011 | Interim Market Report corporate governance

Barclay Simpson 2011 Interim Market ReportCORPORATE GOVERNANCE

1|14

CONTENTS

01. Introduction

02. the economic environment

03. the corporate governance environment

04. the recruitment Market

05. Market reviews

06. outlook

Barclay Simpson 2011 Interim Market Report

CORPORATE GOVERNANCE London

Edinburgh

New York

Dubai

Hong Kong

Barclay Simpson

Barclay Simpson is an international corporate governance recruitment consultancy specialising in internal audit, risk, compliance, information security, business continuity, legal and treasury appointments. Established since 1989 Barclay Simpson works with clients in all sectors throughout the UK, Europe, North America, Middle East and Asia Pacific from our offices in London, Edinburgh, New York, Dubai and Hong Kong.

L o c a L k n o w L e d g e - g L o b a L r e s o u r c e s - s p e c I a L I s t c o n s u L t a n t s


2|14

welcome to barclay simpson’s 2011 Interim corporate governance Market report. This is the 21st year we have produced market reports summarising and analysing recruitment trends in corporate governance. This report serves to review developments during 2011 and to provide an insight into how the recruitment market for corporate governance will develop for the remainder of the year.

Formally the recession has been over for two years. In more usual times the economy would be a place of rising confidence and investment as it embarked on a period of steady growth. It is clear we are far from there. The corporate governance recruitment market is currently operating in an environment of sub trend growth and squeezed living standards. Against this backdrop many parts of the corporate governance recruitment market appear surprisingly robust. Whilst the frenetic demand from the financial services sector has substantially subsided, overall levels of demand in the corporate governance recruitment market remain sufficient to provide full employment.

Perhaps it is best to view the corporate governance recruitment market through the prism of wider employment patterns. The UK economy has gained 375,000 jobs during the course of the last year. This is the result of 520,000 gains in the private sector and 145,000 losses in the public sector. We can confirm that for the small part of the recruitment market that we know and understand, the total number of corporate governance staff employed in the

economy grew in the last twelve months. That is something for which we should be grateful.

For more in-depth coverage, comprehensive market reports exist for Internal Audit, Compliance, Risk, Security and Legal recruitment markets. This can be assessed online at:http://www.barclaysimpson.com/internal-computer-audit-2011-interim-market-report/

http://www.barclaysimpson.com/risk-management-2011-interim-market-report/

http://www.barclaysimpson.com/compliance-2011-interim-market-report/

http://www.barclaysimpson.com/information-security-2011-interim-market-report/

http://www.barclaysimpson.com/legal-2011-interim-market-report/

We place great value on the professional reaction to our reports and would appreciate your comments or any requests for further clarification or information. Please feel free to contact us on 0207 936 2601 or [email protected].

01. INTRODUCTION


3|14

economic forecasts for global growth are becoming less positive. western economies, in spite of exceptionally accommodative monetary policies, are experiencing sluggish growth. Fiscal deficits are historically excessive, personal indebtedness high and within the Eurozone the risk of sovereign debt default real. Against this the developing economies of the world are at risk of overheating. Inflation caused by excessive credit expansion and rising commodity costs are becoming a threat to stability. The global economy remains unbalanced and efforts to rebalance it by changing the pattern of demand are stalled. Given the fragility of the Western economies it is difficult to believe that the current pattern of global demand can be made good without some potentially serious economic shocks.

The economic situation in the UK is problematic with economic output still 4% below the level achieved in the first quarter of 2008. Whilst the number of people employed in the UK is above where it was in the boom year of 2006, and employment could be considered a bright spot, the UK economy is recovering more slowly than the rest of G7. In fact the UK was the last out of recession and its slow growth since is more a demonstration of how bad the economic situation in the UK had become. whilst some are quick to blame government cuts in reality the biggest contribution to economic growth in the first quarter of 2011 came from public spending. unfortunately government spending along with debt fuelled consumption is an unlikely source of future growth.

The deeper the problem, the longer it takes to resolve. With huge public and private debts in the UK, dysfunctional banks, a lack of competitiveness combined with rising oil and food prices, the recovery was always going to be slow. What the economy needs is a surge in exports and an increase in investment. Unfortunately the global economy is slowing and it is a concern that business investment fell in the first quarter of 2011. It is hardly a vote of confidence in the UK economy when companies are sitting on huge cash piles. What the government needs is perhaps a more coherent growth strategy. Whilst it would take even greater cuts elsewhere, reducing taxes, more deregulation and investment in infrastructure, training and education would all produce a more competitive economy.

there would appear to be no pain free solution from the economic situation in the uk or perhaps even the world. Given that interest rates in the UK can only rise from here, an extended period of sub trend growth and squeezed living standards are likely.

In spite of this, employment has held up better than we expected. The economy has created a net 375,000 compared with a year ago and at 2.4 million or 7.7% of the workforce, unemployment is falling. During the recession unemployment did not rise to the peaks that many expected and in spite of the many malign influences buffeting the UK economy the total number of people employed remains higher than in many other western countries.

econoMIc HIgHLIgHts

UK economic growth in the first quarter of 2011 was disappointing and the economy according to the IMF’s latest forecast will grow by a below trend rate of 1.5% for the year. Given that government cuts have yet to impact the economy and the potential for economic shocks from the international economy, there remains significant potential for further growth downgrades.

At 7.7%, unemployment fell by almost 100,000 in the three months to April 2011. Overall employment remains a bright spot for the economy with the private sector creating over 500,000 in the last year. The total number of people employed in the economy now stands at 29.2 million.

The Bank of England continues to remain sanguine about inflation. However many remain concerned that with CPI inflation at 4.5% and RPI higher, inflation will become embedded in the economy. Interest rates have now been held at 0.5% for 28 months and it is a testament to how weak the economy remains that no rise is in sight.

the deeper the problem, the longer it takes to resolve. “

02. THE ECONOMIC ENVIRONMENT


4|14

as we reported earlier this year the reforming zeal that was evident in the aftermath of the financial crisis has dissipated. reforming the governance and regulation of the banks and wider financial services industry is no longer a coordinated crusade and does not enjoy the political focus it did. It has increasingly settled into regional and national initiatives. The crisis in this respect may ultimately have been a terrible waste. However, in both the UK and EU, regulators are acting against a backdrop of a simmering sovereign debt crisis and a banking system that remains fragile. The financial services industry is a significant part of the UK economy and as in most other countries, in spite of the need to reduce the threat posed by their banks, there is little appetite to undermine their competitiveness.

Within the UK, in spite of shrinking their balance sheets by £1.5trillion, the deleveraging of the banks is nowhere near complete. When assessing what can realistically be achieved by regulatory reforms, ensuring this process is allowed to continue without disorderly defaults and a crisis remains the unpublished policy objective.

The global response to the financial crisis and the coordination of the regulatory response took place under the auspices of the G20. whilst the objectives remain consistent, regional and national initiatives are being promoted at the expense of international co-ordination. this is perhaps only to be expected in a world of different levels of development and growth. It is recognition that a ‘one size fits all’ approach is not practical in a diverse global economy. As co-ordinated financial reforms are in danger of ultimately yielding little, it is perhaps crucial to get the capital requirements of the banking sector right. Basel III guidelines require banks to boost their core tier one ration of equity to risk-weighted assets from 2% to 7%.

Whilst regulators around the world signed up to Basel III, it is clear that having agreed the need for more capital, implementing common rules and standards is a far greater challenge. However the issues are complex. The EU’s capital requirements directive designed to incorporate Basel III into the regions banking rules appears to have loopholes that are set to undermine the requirements. critics would argue that policy makers are under pressure from the banks to relax the requirements to avoid slowing economic growth. However, we have recently experienced what a system that is not sufficiently capitalised to be able to absorb losses does for growth. An undercapitalised banking system is a disaster waiting to happen. Given the lack of clarity in the rules it is not surprising that many risk managers in Europe do not believe Basel III is assisting them.

At a national level the Independent Commission on Banking led by Sir John Vickers delivered its interim report in April. It baulked at the formal separation of retail and investment banking. This was in spite of recognising that a state guarantee for retail banking provides cheap funding for the universal bank’s investment or ‘casino’ banking activities which were previously described by Lord Turner as lacking any social utility. In essence the rather moderate proposals plan is to impose a 10% tier one capital ratio on systematically important lenders and to ring fence retail banking away from investment banking. The government has seemingly accepted these interim proposals and the attempt to gain greater financial stability without fully separating retail and investment banking. Given the banks are in the process of rebuilding their capital bases this should not be too draconian or undermine London as a global financial centre. However as with basel III and so much regulation, the devil is in the detail. there are so many grey areas including what might be regarded as capital and what is a retail or investment banking activity.

Whilst a universal regulatory environment is out of reach, the pressure on effective governance remains. The new regulatory structure for the UK has begun to emerge. In April the FSA announced an internal reorganisation to help it evolve into its new structure. The Supervision and Risk business units have been replaced with a Prudential Business Unit that as the Prudential Regulatory Authority (PRA) will become a subsidiary of the Bank of England.

“an undercapitalised banking system is a disaster waiting to happen.

03. THE CORPORATE GOVERNANCE ENVIRONMENT


5|14

A Conduct of Business Unit will become the FSA’s renamed Financial Conduct Authority which will focus on consumer protection and market regulation. The Financial Policy Committee has also recently had its first meeting. As part of the Bank of England it will sit alongside the Monetary Policy Committee and is tasked with identifying where banks and other financial institutions are collectively taking excessive risks. It is planned to have the power to control the supply of credit and to stop asset bubbles developing.

However banks have already been warned that they will be scrutinised more intensely following the introduction of the pra. this is a move away from simply regulating structures, activities and compliance with procedures. Its incoming head, Hector Sants, has stated that their judgements would no longer be taken on trust and the PRA is far more likely to challenge their decisions. The regulator will take their own view formed from their own analysis of the issues which affect the safety and soundness of a bank. The regulator will have the power to modify business plans. The FSA is already searching for excessive risk taking with the introduction of Business Model Assessments (BMAs).

The financial services industry in the UK is under intense regulatory scrutiny with much new regulation coming into effect in 2012. It is not surprising that 2011 is likely to be the year when the heaviest investment in risk management and compliance personnel and systems is made. The cost is considerable and just how much is boiler plate might remain to be seen. However, it is clear that boards are becoming more actively involved in risk management and it has become an integral part of management. there are any number of initiatives that financial services groups are embarking on to strengthen and improve risk management strategies, processes and systems.

Measured by the number of people employed in corporate governance and the costs involved, the financial services industry dominates corporate governance. It is perhaps easy to forget that the financial services industry represents rather less than 10% of GDP and that corporate governance does have implications for the rest of the economy. However, in recent years regulatory developments in industry and commerce have been limited. This may be indicative of the success of the present regime. Whilst major companies still fail, and it is central to capitalism that they are allowed to do so, it is rarely as a consequence of poor governance per se. More recently many corporate collapses have involved the activities of private equity houses. Having replaced equity with debt they have left companies thinly capitalised and unable to navigate what may be modest downturns in business. It could be argued that where the collapse of a company has wider social implications such as those operating in the utility, medical and care home sectors, there should be greater regulatory scrutiny.

Whilst the EU has launched a Green Paper on corporate governance reform it has potentially little relevance to the employment of corporate governance practitioners in the way that Sarbanes Oxley did after the accounting scandals ten years ago.

“whilst major companies still fail, and it is central to capitalism that they are allowed to do so, it is rarely as a consequence of poor governance per se.


6|14

we do not know how many people are employed in corporate governance in the uk or precisely how employment divides up between the different sectors of the economy. we perceive the different sectors to be financial services, industry and commerce, consultancy and the public sector. As a rough guide and this is perhaps influenced by the resources Barclay Simpson as a recruitment consultancy devotes to each sector, a split of 60% financial services, 20% industry and commerce, 10% consultancy and 10% public sector appears to us about right. Given that the financial services industry accounts for a little less than 10% of the UK’s GDP, the sector employs a disproportionately large number of the corporate governance practitioners. The percentage working in financial services is boosted by compliance managers who work exclusively in financial services together with a high percentage of risk managers. It is within this context that the Barclay Simpson Recruitment Index should be read.

barcLay sIMpson recruItMent Index

The Barclay Simpson UK Corporate Governance Recruitment Index is based on the number of new permanent and interim vacancies registered in the UK. It is calculated on a three month moving average. The constituent recruitment markets that make up the Index are internal audit, risk management, compliance, information security, legal and treasury risk.

The Index has been calculated from 1st January 2008 which was the first day of the first quarter that the UK economy entered a recession. It lasted six quarters through to 30th September 2009.

The Index charts the course of the recession and the recovery. The Index troughed in May 2009 at 52, having halved from the onset of the recession in April 2008, to stand at 115 by December 2010 and 117 by June 2011.

Given that according to our Index the number of vacancies has increased in 2011, it may be surprising that the actual level of recruitment activity, and the number of people accepting new positions, declined during the first half of 2011. The corporate governance recruitment market no longer has the slightly heady feel that it had during 2010. There are a number of reasons.

First, whilst the total number of vacancies has increased, it is perhaps a little misleading in the context of overall market. In most areas of the financial services industry as we report elsewhere, the number of vacancies has declined. There are however three areas where the number of vacancies have grown. One is compliance which is not surprising given the number of regulatory initiatives that will go live in 2012. The second is in industry and commerce in areas such as internal audit, information security and legal and finally the consultancy sector.

secondly last year, as a consequence of the recession, there was a supply of readily available candidates to accept offers when they were made. This year the recruitment market is characterised by a shortage of candidates with the skills and abilities that are in demand. Most participants in the market are aware of this including employers who are currently more likely to provide inducements to retain staff who attempt to resign. For example the sheer demand for compliance managers precludes any possibility that they will be available in the recruitment market. The shortage is made worse by candidates seemingly becoming more cautious. Our comment on the current economic environment is hardly an endorsement of a healthy economy. If we are able to draw such conclusions so are other people.

thirdly there is a degree of uncertainly in the City. The Independent Commission on Banking has made its interim recommendation that have seemingly been accepted by the government. How this will affect the employment in the banks concerned remains to be seen.

“the corporate governance recruitment market no longer has the slightly heady feel that it had during 2010.

04. THE RECRUITMENT MARKET

Dec

200

7

Jun

200

8

Dec

200

8

Jun

200

9

Dec

200

9

Jun

201

0

Dec

201

0

Jun

201

1

0

20

40

60

80

100

120

140


7|14

Fourthly, profitability in the financial sector rebounded strongly last year along with most other Western economies. Financial markets have proven more problematic this year and sluggish economies are not helping. Within the banking sector selective recruitment freezes emerged during the second quarter of 2011. This was in response not only to tougher markets but also to the sheer volume of recruitment that some banks undertook in the preceding quarters. Whilst corporate governance recruitment remains a priority, given this environment, many financial services groups will only recruit those who very closely meet their requirements. Our recent experience is that corporate governance practitioners with highly relevant skills are able to acquire multiple offers, those who do not struggle. Further, there are an increasing number of vacancies requiring specialist skill sets that are rare and therefore difficult to fill.

given this scenario the propensity of financial services groups to recruit has slowed in the last six months. our current experience is that employers wish to review more cvs, conduct more interviews and require the authorisation to recruit to be signed off at a higher level of management than in the second half of 2010.

Demand in industry and commerce, having lagged the financial services industry in 2010, has strengthened both absolutely and relative to the financial sector in 2011. Given the strong recovery in profits during 2010 we had been surprised at the low level of demand from industry and commerce. However the multinational groups that are responsible for the majority of demand returned to the recruitment market in the final weeks of 2010.

Whereas there is little evidence that companies in industry and commerce are looking to grow their corporate governance departments, the number of internal auditors, information security practitioners and lawyers employed in the sector has increased and is returning to pre-recession levels of staffing. Having now substantially made up on the recruitment lost during the recession, the principal driver in the second half of 2011 will be to replace staff as vacancies become available.

Demand for corporate governance expertise from the consultancy sector remained a feature of the recruitment market during the first half of 2011. The total number of corporate governance consultants employed is expanding as outsourcing and the use of consultants to help meet various regulatory deadlines continues to grown.

Demand from the public sector is now limited and we realistically expect little demand for the foreseeable future. Compulsory redundancies remain low but there is a steady stream of enquiries from corporate governance staff working in the sector.

we anticipated at the start of the year that 2011 will most likely be a year when the recruitment of appropriately skilled corporate governance staff would remain a challenge. to date we have not been wrong.

“demand for corporate governance expertise from the consultancy sector remained a feature of the recruitment market during the first half of 2011.


8|14

In this section we provide a brief summary of the individual corporate governance markets. For a comprehensive review of any particular market please refer to the relevant market report.

As recruitment consultants we spend much of our time talking to and dealing with corporate governance and human resources departments. We speak directly with a number of heads of department to discuss their current and future recruitment requirements as well as the broader picture to gain a qualitative perspective which is invaluable for our market reviews. We also attempt to portray the market in terms of quantitative data based on the following sample structure;

• 50 internal audit departments

• 30 risk management departments

• 30 compliance departments

• 35 information security departments

• 30 legal departments

The core statistics provide the following key information for:

vacancIes

• Number of vacancies at the start of the period

• Number of vacancies generated during the period

This, over time, provides guidance on the rate at which vacancies are being generated and an indication of the ease with which companies are filling these vacancies.

regIstratIons

• Number of candidates registering in each market segment

This monitors the flow of candidates into the recruitment market and, combined with the number of vacancies generated, gives an insight into the balance of supply and demand.

deFensIve regIstratIons

• The proportion of candidates registering for defensive reasons

The percentage of candidates registering with Barclay Simpson because they have been made redundant or perceive the threat of redundancy (i.e. who register for defensive reasons), can provide a useful insight into the behaviour of the recruitment market.

05. MARKET REVIEWS


9|14

Market Review – Internal Audit

we do not expect candidate registrations to significantly rise in the later half of 2011. “

Internal audit Jun 2009 dec 2009 Jun 2010 dec 2010 Jun 2011

New vacancies 29 46 68 73 67

Closing vacancies 17 24 35 38 42

Candidates registering 226 274 296 276 227

Defensive registrations 23% 19% 15% 14% 16%

Overall salary increase 11% 10% 14% 15% 14%

vacancIes

At 67, the number of vacancies has fallen back from the level achieved in the second half of 2010 and is below the 68 achieved in the first half of the year. However, whilst the number of vacancies is down, outside of the public sector, the pattern of demand is more evenly spread across the economy. Given the economy is experiencing sub-trend growth it is not surprising that the number of vacancies is below the level that was considered usual prior to the recession. Corporate investment, which has historically underpinned employment growth, has fallen from 2010 levels. It is unlikely in the short term that demand from UK centric internal audit departments will climb further. However, for those multinationals that base their internal audit departments in the UK, which still make up a significant proportion of the aggregate demand for internal auditors, a weak pound makes the UK a relatively cheap location to base international internal auditors. Whilst we have no evidence to confirm this has been a factor in overall demand, is does provide some reassurance that in the short term internal audit jobs are less likely to be lost in the UK.

The number of closing vacancies has risen from 38 to 42. It is indicative of two factors that are at play in the recruitment market. First, companies are being more cautious about their recruitment. The immediate effect of this is that they will only recruit those who closely meet their requirements. Secondly, where are the internal auditors to fill the available vacancies? In spite of the subdued state of the economy a chronic shortage of internal auditors has already developed. This leads us to again conclude that the shortage of internal auditors in the economy is structural rather than cyclical.

regIstratIons

At 16% defensive registrations remain low. If registrations from the public sector were excluded then defensive registration would be under 10% and at historic lows. As we have previously reported redundancies were low during the recession and if internal auditors believed they were not going to be made redundant then, it is even less likely they will now. At 227 the number of candidate registrations has fallen. Many internal auditors who delayed looking for a position during the recession entered the recruitment market during 2010. The number of registrations is now more reflective of the long term average and may be even more subdued as a consequence of the economic backdrop. For most internal auditors, a move into the recruitment market is a statement of confidence. However, nobody can doubt the potential risk of a further economic setback precipitated by the simmering European sovereign debt crisis and other potential catalysts that remain firmly in the media focus. We do not expect candidate registrations to significantly rise in the later half of 2011.

saLarIes

The average salary increase achieved by internal auditors changing jobs fell back to 14%, and remains close to its long term average. Whilst the bargaining power of internal auditors has risen during the last six months, the number of internal auditors securing positions in industry and commerce has risen relative to those securing positions in banking and financial services. Given the more competitive job market for internal auditors in the City, salary increases gained on changing employer in financial services have historically been higher than in commerce.

The internal audit recruitment market is currently experiencing patterns of supply and demand similar to those that existed prior to the recession. Whilst demand recovered strongly in 2010 it was heavily biased towards the financial sector and specifically the banks. One bank having 25 vacancies, whilst potentially flattering the total aggregate number of vacancies, does little for the wider recruitment market. Notwithstanding developments in the public sector, the internal audit recruitment market is currently enjoying the broadest level of demand in over three years. The perennial problem of where the skills and experience to meet this demand will come from remains.


10|14

Market Review – Information Security

vacancIes

At 53, the number of vacancies has fallen below the levels achieved in 2010. Whilst the number of vacancies is down, the pattern of demand is more evenly spread across the economy. One bank having 15 vacancies, whilst potentially flattering the total aggregate number of vacancies, does little for the wider recruitment market. Given the economy is experiencing sub-trend growth it is not surprising that the number of vacancies has fallen. Further, corporate investment, a substantial element of which is IT related, has recently fallen back from the already low levels of 2010. This investment has historically helped underpin recruitment in information security.

The headcount freezes that were still common in 2010 have largely disappeared. However, information security departments are still regularly under pressure to use external recruitment as a last resort and considerable effort can be required to get roles signed off. It is perhaps indicative of a lack of confidence in the economy rather than the information security work that is currently available.

What is not obvious from the statistics is that demand is currently being driven by mid level managerial roles rather than the more senior recruitment that was prevalent six months ago. Senior managers were in greater demand as a result of the significant amount of restructuring that was then taking place.

candIdate regIstratIons

At 17% defensive registrations have now levelled off at pre-recession levels. It is seemingly a characteristic of the information security recruitment market that defensive registrations are consistently higher than in other areas of corporate governance. This may be indicative of the more capricious nature of the IT industry. Given that the information security market is operating at full employment, at 208 the number of candidate registrations has remained relatively high. It is clear that information security practitioners having sat out the recession or taken a “make do” position, are now looking to improve their circumstances.

saLarIes

During the first six months of 2011 the average salary increase achieved by information security practitioners moving jobs moved higher from 11% to 13%. In the period few candidates accepted roles from a position of redundancy. As a consequence the bargaining power of information security practitioners has returned and salary increases are now slightly above their long term average. It is not a bad achievement in an economy where real earnings are falling. However, what is not obvious is that with a higher number of candidates moving between sectors, some are being compensated with higher salaries for the loss of benefits such as cars and in financial services bonus pools.

It is clear that information security practitioners having sat out the recession or taken a “make do” position, are now looking to improve their circumstances.

“

Information security Jun 2009 dec 2009 Jun 2010 dec 2010 Jun 2011






The information security market is currently experiencing patterns of supply and demand similar to those that existed prior to the recession. Whilst demand recovered strongly in 2010 it was heavily biased towards retail banking. Demand has broadened out across a wide range of end users and consultancies. The seeming increase in high profile electronic attacks has resulted in ‘cyber security’ becoming a subject not to be ignored and is underpinning demand for information security practitioners. Whereas in information security most recruitment is now for single hires, there are team building exercises underway in business continuity. Whilst the number of vacancies has fallen back, the pool of redundant information security professionals has dissipated. Information security is now operating effectively at full employment and unlike other areas of corporate governance, information security professionals are able to switch sectors. Increasingly the same candidates are in demand from a range of sectors. The information security market is currently enjoying the broadest level of demand in over three years.


11|14

Market Review – Risk Management

cost reduction plans still remain very much in place. “

risk Management Jun 2009 dec 2009 Jun 2010 dec 2010 Jun 2011

New vacancies 56 102 140 136 130





The number of risk managers employed in the financial services industry, having grown substantially during the last 18 months, is starting to plateau. However, the total numbers employed and the overall quality of risk managers is now higher than it was prior to the recession. The risk management profession now enjoys a level of influence in the financial services industry that was not previously there. From a regulatory and management perspective, risk management must not only be seen but also heard. Given this higher profile and at any given time the finite number of risk managers available, it is not surprising that many financial services groups are finding it difficult to recruit risk managers at the standard they desire. Many of the best risk managers are receiving multiple offers, together with ‘buy backs’ from their existing employers. It is also clear how delicately both the economy and financial system is currently balanced. Whilst the total number of people employed in the financial services industry is growing, there are still concerns about growth and falling business volumes. Cost reduction plans still remain very much in place.

vacancIes

The number of vacancies registered in the first half of 2011 has fallen from 136 in the second half of 2010 to 130 in the first half of 2011. The second half of 2010 was probably the high point in demand in the current economic cycle. The initial response to the financial crisis, to invest heavily in risk management and corporate governance has now taken place. If companies were going to establish or expand risk management departments, this has now been completed or is in the process of being completed. However, given the greater number of people now working in risk management, the ongoing demand for risk managers will be higher than prior to the recession.

The number of outstanding vacancies has risen from 92 at the end of 2010 to a post recession high of 96. This reflects both the difficulty that many companies have in securing the services of appropriately experienced risk managers and their determination not to compromise. It is also indicative of the more cautious approach to recruitment that many financial services groups are now taking. It is not unusual for additional interviews to be introduced to the recruitment process and for hiring decisions to be made at a higher level of management.

Given the feeble state of the wider economy, such caution is perhaps a small price to pay for the very real gains made by the risk management profession.


Most candidates are now entering the recruitment market for the more prosaic reasons of career development. Defensive registrations are currently at 9%. This is still a historically low level. These statistics are indicative of the general confidence most risk managers feel about their job security, even though the total number of candidate registrations is falling. The most likely reason for this being that many risk managers took the opportunity to move last year and, whilst not concerned about their personal job security, are still aware of the many continuing risks to the financial system.

saLarIes

Salary increases achieved by risk managers has fallen from 19% to 17% and is indicative of the caution that is currently being exercised in the industry. Whilst in treasury risk there have been examples of 50% salary increases, these are very much the exception. In an economy where real earnings are falling and most employees in the financial services industry are receiving salary increases equivalent to inflation, 17% remains a relatively high percentage. Many companies remain determined to recruit appropriately experienced risk managers. There are a number who are showing restraint. However, a number are showing restraint and are more prepared to sell the quality of their opportunity. If the salary differential is not too great, this approach is often successful.


12|14

Market Review – Compliance

Looking for a new position, however is not the same as securing one. “

compliance Jun 2009 dec 2009 Jun 2010 dec 2010 Jun 2011

New vacancies 64 76 151 147 167





Demand for compliance staff now exceeds pre-crisis levels. It is the result of not only increased UK and EU regulation, but also more aggressive regulatory supervision. In response, significant numbers of not only new positions but whole new teams have been created. It does beg the question: when a market is expanding in the way that compliance is, where will the people with the skills and experience come from? It is perhaps a particularly pertinent question when it is clear that the expectations employers have of their potential recruits is rising. Recruitment is taking longer as additional stages are added to the selection process. The increase in demand for compliance staff, rising expectations and the limited pool of expertise, is resulting in higher salaries. The need to employ more compliance staff at higher salaries will make the provision of financial services more expensive and ultimately less competitive. Striking the right balance in an environment when sensitivities to the financial crisis remain high is both a political and regulatory challenge.

vacancIes

The number of new vacancies increased from an already high 147 in the second half of 2011 to 167 in the first half of 2011. Unlike other areas of corporate governance, where a high proportion of the vacancies are simply to replace those who have left, many of the vacancies are newly created.

At the start of the year demand was particularly strong from the asset management and insurance sectors. This demand then spread to include the banking sector with demand building from the investment banks during the course of the second quarter. It includes both London based institutions and those based elsewhere in the UK. Vacancies arose at all levels of experience and seniority from entry level to Head of Compliance.

The number of outstanding vacancies has increased from 73 to 86. This reflects the difficulty many companies are having in securing compliance specialists with the skill sets they require.

Given that in the short term there is only a finite number of compliance specialists with the appropriate experience, and given what appears to be more rigorous recruitment processes, an increase in the number of outstanding vacancies is almost inevitable. They are likely to stay high for the remainder of 2011 and possibly beyond.


Candidate registrations increased from 137 in the second half of 2010 to 156 in the first half of 2011. The number of candidates registering for defensive reasons remains at an historic low of 8%. Compliance professionals are currently enjoying high levels of job security. In spite of the depressed state of the economy, the rise in candidate registrations is indicative of a market where compliance professionals are feeling not only more secure but are sufficiently confident to actively look to improve their employment prospects. This is not surprising given how effective the recruitment industry is at advertising the opportunities available. Looking for a new position, however, is not the same as securing one. Companies have become more rather than less selective.

saLarIes

The upward pressure on salaries evident during 2010 has continued. The average salary increase achieved by compliance professionals changing employment has risen from an already high 21% in 2010 to 22% in the first half of 2011. In the present market, good candidates are receiving multiple offers. Counter offers from existing employers have become a regular feature of the recruitment market. Some companies have even been prepared to buy out bonuses. Whilst not unusual in front office positions, this has historically not been a feature of the compliance recruitment market.


13|14

Market Review – Legal

the majority of lawyers now registering are simply doing so for career development reasons and do not have the urgency to move that we had previously seen.“

Legal Jun 2009 dec 2009 Jun 2010 dec 2010 Jun 2011






vacancIes

The number of new vacancies fell from 101 in the second half of 2010 to 74 in the first half of 2011. The high number of vacancies generated during 2010 was in reaction to the financial crisis. Many financial services groups and particularly the larger utility banks had recruitment freezes and had not recruited externally for almost two years. When the regulatory response to the financial crisis required substantial legal input, the necessary resources were not available internally. However, a significant pool of unemployed lawyers was available. The result was that many banks came to the recruitment market and were able to fill multiple vacancies from this pool. This recruitment is now substantially complete and most banks have legal departments that are fully staffed with talented and adaptable lawyers.

The number of outstanding vacancies has fallen from 49 at the end of 2010 to 43 now. The number is higher than expected and there are two reasons for this. Firstly, the number of lawyers available in the recruitment market has declined making it more difficult for companies to recruit. Secondly, many financial services groups are taking a more cautious approach to their recruitment. It is not unusual for additional interviews to be introduced to the recruitment process and for the authority to recruit to be made at a more senior level of management. As a result, recruitment processes in 2011 are now taking longer than in 2010.


The number of candidates registering fell to stand at 219 in the first six months of 2011. Defensive registrations rose marginally from 13% to 14%. Whilst only a fraction of the percentage during the recession, the increase reflects the potential concerns of some lawyers working in investment banking. The fall in candidate registrations, whilst relatively modest, indicates that lawyers now perceive prospects with their existing employers to have improved. Many financial services groups are providing incentives to retain their better lawyers. The majority of those now registering are simply doing so for career development reasons and do not have the urgency to move that we had previously seen.

saLarIes

The salary increase lawyers achieved when changing employer rose to 15% in the first half of 2011. This is indicative of the shortage of lawyers in the recruitment market. Whilst companies are being more cautious in their recruitment processes, there is no longer an abundance of redundant lawyers who are prepared to accept positions on the same or, in many instances, lower salaries than they had previously been earning. Lawyers now have greater bargaining power. However, given the wider economic backdrop and the headwinds facing the financial services industry, we do not anticipate the percentage moving above its current level of 15% in the foreseeable future. It most likely represents a highpoint.

Given that Barclay Simpson only began to recruit for private practice and in-house commerce lawyers last year, we have restricted this analysis and our commentary in this section to our activities in the financial services sector. We will cover private practice and in-house commerce in the next section. The legal recruitment market was transformed over the course of 2010. The large pool of out of work lawyers that existed at the start of 2010 has been absorbed back into employment. Now, in July 2011, the number of redundant lawyers is not materially higher than in the period leading up to the financial crisis and recession. However, going forward the pattern of demand that has become established in the first six months of 2011 is more typical of what we can expect for the remainder of the year.


14|14

the corporate governance recruitment market has an air of normality about it. whilst demand in most sectors is nothing to write home about, the recruitment market is turning over and candidate shortages are as evident today as at anytime in the past.

Against this, the economic environment is about as far removed from normal as it ever has been. Zero interest rates are not a product of a healthy economy and there are very real risks to both the UK and wider world economy. Currently it is the sovereign debt crisis in Europe that is most clearly in focus. There are likely to be others that will become more clear during the course of the next few months.

We make this point because corporate governance is now an established source of employment for tens of thousands of people. It has a vibrant recruitment market where skills and experience are bought and sold. However nobody should forget that ultimately it is all dependent on the economy.

Unfortunately we have no better idea how the economic chips will ultimately fall than anyone else. Muddling through over an extended period of time is probably the most likely scenario. In the UK it is seemingly consistent with the current sub trend growth and declining standards of living.

we should therefore be grateful that even though not as many corporate governance vacancies are likely to be generated or filled as we would like, for the moment confidence remains sufficiently high for the wheels of the recruitment market to keep turning. Whilst hardly inspiring it would not be such a bad scenario to anticipate for the remainder of 2011. Corporate governance practitioners remain in a better bargaining position than most other groups within the UK employment market.

05 – OUTLOOK

“corporate governance practitioners remain in a better bargaining position than most other groups within the uk employment market.

2011 | interim market reportww1.prweb.com/prfiles/2011/08/02/8689199/bs report.pdf · 06. outlook...

Documents