Compensation and Market Trends

Interim Report 2014Risk Management

Welcome to Barclay SimpSon’S 2014 RISK MANAGEMENT CoMpENSATIoN ANd MARKET TRENdS INTERIM REpoRT

Barclay Simpson has been producing corporate governance market reports since 1990. This year, as we did last year, we are using our Mid-Year 2014 report as an opportunity to focus primarily on compensation. This report seeks to provide insight and guidance into compensation within risk management. It is supported by a comprehensive survey of risk management professionals registered with Barclay Simpson in June 2014. Comparable reports exist for all other areas of corporate governance. They can be accessed in section 6 of this report (“About Barclay Simpson”) or at www.barclaysimpson.com

We place great value on the professional reaction to our reports and would appreciate your comments and any requests for further clarification or information.

BARCLAY SIMPSONCOMPENSATION AND MARKET TRENDS INTERIM REPORT

2014RISK MANAGEMENT

01/ ExECuTIvE SuMMARY /102/ MARKET ANALYSIS /203/ MARKET COMMENTARY /304/ SECTOR ANALYSIS /4 05/ SALARY GuIDE & COMPENSATION REPORT /506/ ABOuT BARCLAY SIMPSON /18

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CONTENTS

ExECuTIvE SuMMARY01

RECRuITMENT MARKET hAS SENSE of NoRMAlITy

The uK and wider world economy is operating in a macro economic environment that few would have thought plausible or desirable before the onset of the financial crisis. Central banks have done everything possible to ensure markets and confidence are not undermined. Clearly the financial sector and wider economy has benefited from this stability and the recovery in the risk recruitment market that we reported this time last year has continued.

Recruiting risk managers remains challengingThe uK economy is now forecast to grow by over 3% in 2014 and there are 800,000 more people employed in the uK than a year ago. The financial services industry has accounted for its share of this growth. Real earnings, having fallen by 10% over the last six years, are turning around. Across the economy the availability of workers to fill vacancies is falling at its fastest rate in fifteen years. Just 1% of risk managers currently claim to be out of work. The challenge of recruiting risk managers with the right skills is not new, nor is the need to increase salaries, reshape roles, modify working arrangements or for Heads of Risk Management, where possible, to adjust their recruitment expectations.

Risk managers doing betterWhilst the focus of this report is on compensation, we should not lose sight that it remains only one factor, albeit

an important one, in the employment equation. although average wages in the UK economy have fallen during the past six years, we are confident that risk managers have done better. In spite of cuts in the financial services industry that were common until 2013, the vast sums that have been committed to improved risk management and regulatory reform have benefited risk managers. Notwithstanding the risk managers who, according to our Survey, report no increase in their salaries over the last twelve months, the average increase reported for the last two years has been 6%. This average, like others we have analysed, hides a particularly wide range of experiences.

Job moves enhance satisfaction 53% of risk managers believe they are adequately compensated. Whilst only 20% of risk managers cite salary as their primary motive for changing jobs, (69% cite career development), the average 20% rise in basic salary achieved by those moving job appears to result in salary satisfaction levels increasing to over 70%. Bonuses, pension contributions and other benefits are also used to reward risk managers. At approximately 30% of total earnings, these other benefits have seemingly increased more readily than base salaries and potentially represent a less public way of rewarding high value risk managers.

Market similar to before the crisis no doubt we should enjoy the current air of normality and high levels of demand and employment. after all, what could possibly go wrong with a recruitment market that is eerily similar to how it was before the onset of the financial crisis six years ago?

1

No doubt we should enjoy the current air of normality and high levels of demand and employment

“

MARKET ANALYSIS02

2

VACANCIES

vacancy rates levelling off in 2014 The number of vacancies rose strongly in 2013 as a consequence of regulatory pressures and the increased demands made upon risk departments. after last year’s strong performance, the number of vacancies levelled off in the first half of 2014.

The major upheavals caused by the financial crisis and regulatory response is coming to a close. The last twelve months, particularly in the context of the last six years, has been a period of relative calm and stability for the financial services sector. There are now fewer instances of the multiple vacancies that were common in risk management last year, driven by regulatory pressure or strategic changes in business models.

On a sector by sector basis, most investment and corporate banks are recruiting. Whilst the number of vacancies in asset management and insurance are lower than in banking, demand remains broadly consistent with 2013. Sectors where demand is stronger include retail banking and supervisory roles at the regulator.

In 2014, there has been increased emphasis on more junior AvP/Associate positions as companies look to contain costs and, wherever possible, promote from within. In demand skills are retail credit risk analysts with both modelling and portfolio management, operational risk managers and those with strong regulatory knowledge. Credit risk analysts are currently in particularly short supply.

RATE of plACEMENTS

Rate of placements continuing to rise To provide a better insight into the dynamics of the recruitment market, this graph plots the rate at which placements have been made across the last four years. In order to create a scale, we have taken the results from the first six months of 2010 as our 100% benchmark. The graph demonstrates the willingness of companies to recruit during the period rather than simply registering vacancies and arranging interviews. It reflects the rate at which candidates are being offered jobs which are accepted. in spite of the number of new vacancies levelling off, the rate at which roles are now filled is following the trend established in 2013 and continues to increase. As the economy and market confidence improves, companies are becoming more comfortable with the commitment necessary to make realistic offers of employment. There is clearly a greater sense of urgency to fill vacancies and companies are working with recruiters to speed up processes. the limiting factor remains the availability of risk managers with the appropriate skills. clearly the best candidates are aware of their marketability and for some this results in the setting of unrealistic expectations both for the type of role and salary they can command. Equally, some companies have yet to respond to the shift in the market, moving too slowly and making unrealistic offers. Their vacancies remain unfilled.

- New vacancies- Outstanding vacancies

- Placement rate

MARKET COMMENTARY03

3

CANdIdATE ShoRTAGES BECoMING CoMMoN

the financial services industry and risk recruitment market is benefiting from a period of relative stability both from a business and regulatory standpoint. As we reported at the start of the year, companies are now firmly focused on the reasons why they should recruit. According to our Survey, 24% of the risk managers we surveyed changed job in the last twelve months, up from 21% last year.

Not all risk managers are benefiting. For example, heavy regulatory capital burdens are causing some banks operating in the fixed income and commodities sectors to exit these markets or put their activities into non core divisions.

Regulation still influencing the marketRisk managers in these areas are not experiencing the same in-demand glow as those working in regulatory reporting.

Not surprisingly, regulation is still continuing to influence the market. in 2014, we have seen regulatory emphasis on Capital and Reporting, Conduct Risk and operational Risk. Increased lending and trading is driving demand for credit and market risk analysts and there is intense regulatory pressure on some companies to improve their risk functions or face sanctions. In such instances the need to recruit becomes acute.

Candidate shortages are common and instrumental in driving salaries. Senior roles at director and Vp level are better supplied than at AVp levels where demand is highest and there are significant shortages of

candidates. A contributory factor is the huge cut back in graduate recruitment at the height of the financial crisis. This is now resulting in fewer risk managers with 5-6 years experience frequently required. Equally, offshoring of junior risk management roles and the creation of shared service centres has contributed to shortages of uK based candidates.

Marketable risk managers are commonly able to acquire multiple offers as well as a counter offer from their existing employer on resignation. There is no obvious or easy solution to this chronic shortage of candidates. However, companies clearly improve their chances by using efficient and effective recruitment processes that are user friendly and put the company and opportunity in the best light. Moving quickly and decisively when they engage with a risk manager with the required skills and experience is vital.

Companies rarely compromiseIn spite of candidate shortages, companies are rarely prepared to make significant compromises on the quality of candidate or level of experience they require. Whilst our Survey yet again confirms that the vast majority of risk managers come to the recruitment market for career development reasons, salary is an innate part of their decision making process. Some risk managers are entering the recruitment market having had their salary frozen. Given they have in-demand skills, a move represents a good opportunity to capitalise on their salary. Clearly, and this is evidenced by some of the significant salary increases that risk managers have achieved by changing jobs, companies are prepared to offer substantial increases to secure key recruits.

Recruitment market has changedThe way the risk management recruitment market works has changed. Social media and particularly Linked-In were relatively peripheral six years ago. Whilst social media has allowed companies to establish effective in-house recruitment teams to exploit publically available databases of potential candidates, they have most success recruiting more readily available risk managers than those with specialist, difficult to source skills. Traditional and particularly specialist recruitment companies still have a significant value enhancing role to play.

Social media has also lowered the barrier to entry into the recruitment market with potentially huge quantities of passively interested potential recruits. It is not always clear how interested these individuals are until an offer of employment is made.

The huge cut back in graduate recruitment at the height of the financial crisis is now resulting in fewer risk managers with 5-6 years experience

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SECTOR ANALYSIS04

4

BuSINESS RISK

in our most recent annual report, we highlighted across the board demand for business risk managers and particularly those with strong technical experience. Nothing has changed in the first half of 2014.

Risk managers with Operational Risk Frameworks, Internal Capital Adequacy Assessment Process (ICAAP), Scenario & Events Analysis and Stress Testing can seemingly choose who they wish to interview with. The banking sector continues to dominate demand. This demand is principally coming from international banks recruiting for their uK operations rather than uK domiciled universal banks. International banks are broadly looking to bolster second line of defence operational risk functions to bring them into line with the increased regulatory focus on the Capital Requirements Directive Iv / Basel III.

vacancies range from AvP to MD levels with a bias towards more senior appointments. Leadership within operational risk has strengthened and leaders who can balance the management of operational risk profiles of business and functional areas whilst developing risk architectures and operational risk frameworks are in demand.

A reason for the resurgence in demand for operational risk managers is the harsher regulatory environment and ensuing penalties both in the uK and united States. Amongst others, retail mis-selling, Libor-rigging and mortgage-related offences have helped to make operational risk losses for the banks in these two jurisdictions higher than elsewhere. uS banks’ operational risk losses averaged 0.029% of Tier I capital whilst losses at uK banks have averaged 0.011%. No other

jurisdictions have seen average losses over 0.01% of capital.

The funds and wealth management sectors continue to provide a steady stream of vacancies. In most demand are risk managers with a strong understanding of the regulatory environment who can balance running the operational risk profile of the business with enhancing the risk architecture and its output.

fINANCIAl RISK

Within credit risk there is steady demand from corporate and investment banks. Credit analysis, quantitative analytics, reporting, credit risk control and exposure measurement and monitoring are sought after skills. Within retail banking, due to the highly skilled and technical nature of their work, good quality candidates are always in short supply. There is significant demand for risk managers with strong decision sciences, portfolio management and forecasting experience. Demand for risk managers with leveraged finance experience is a clear sign that banks are taking on riskier assets.

Whilst liquidity risk managers are now more readily available, there is still a shortage of high quality candidates with investment banking experience, particularly at Analyst/AvP grade where the majority of vacancies exist. Demand at VP grade is significantly lower and Director roles are now usually filled internally. There are new liquidity regulations emanating from Basel III known as “net stable funding ratio” and “liquidity coverage ratio”. Both ratios are landmark requirements that will apply to all banks worldwide and stimulate demand.

Demand for market risk expertise remains stable with vacancies emerging from market risk analysis and reporting

functions. Overlaps with other areas and, in some cases, a requirement for market risk analysts to have greater input into market conduct risk, are becoming common. Given the close proximity of market risk to traders and their insight into trading activities, they are well placed to assist compliance and operational risk departments develop new market controls to help mitigate conduct risk.

ThE CoNTRACT MARKET

Overall demand for contractors firmed up during the first half of 2014 with regulatory pressures such as ICAAP and SREP driving demand. Banks have also been looking to assess their risk appetite frameworks and focus on passing enterprise wide stress tests. However, given the buoyant economic backdrop and increased business volumes, demand across credit and market risk has been lower than anticipated.

More generally, risk departments have looked to contractors to help implement new regulatory requirements and fill gaps in permanent headcount. Operational risk managers with experience of undertaking Risk Control Self Assessments (RCSA) have been in demand, as have those with stress testing experience as a result of tighter capital adequacy rules. Demand for risk data analysts and risk focused business analysts has increased from small and medium sized companies. These firms are looking to improve their risk systems and infrastructure to allow for more accurate and sophisticated reporting and in depth analysis to be completed.

As in other areas of corporate governance, contracts offered on the basis of pro-rata salaries struggle to attract the best contractors and day rates are again the norm.

this mid-year report includes a significantly expanded section on salaries and compensation, designed to give a much fuller picture of overall remuneration packages.

Most risk managers are keen to know their market worth. This is not always easy to address. Two otherwise similar risk managers may enter the recruitment market and accept materially different salaries. We provide this caveat because we are aware that the risk management recruitment market is sufficiently diverse that it defies simple categorisation. However, risk managers and their employers want guidance and this is what we attempt to provide.

As recruitment consultants, we are involved in the negotiations that take place between employers and prospective employees. We are aware that whilst salary is usually the most important consideration, a number of other factors go to make up total remuneration. In addition to the data we gather from the placements we make and the recruitment work we do, including contact with risk and human resources departments about salaries and other benefits, we have also conducted a Compensation Survey to provide specific detail on all different types of remuneration within risk management.

The Survey was of risk managers registered with Barclay Simpson and was conducted in June 2014. It generated several hundred responses.

Covers both permanent and contract marketsIn addition, we also conducted an Interim Compensation Survey covering the contract market. We have incorporated the key findings into this report to make it as easy as possible to understand the full picture for risk management.

We hope that you find the results interesting. This report provides the key highlights of the Survey. If you would like more detail about your specific sector or role, please call Adrian Simpson on 020 7936 2601 (as@barclaysimpson.com).

This section is broken down into 4 parts:

1. Key conclusions – Key conclusions from Risk Management Compensation Survey

2. overview – Commentary on the major trends in salaries and other benefits paid to risk managers

3. compensation Survey – Results of Compensation Survey completed by risk managers

4. Salary Guide – Guide to salaries for specific risk roles and positions

SALARY GuIDE AND COMPENSATION SuRvEY 2014

05Risk Management

5

1 Key Conclusions

The results from Barclay Simpson’s Risk Management Compensation Survey are encouraging and confirm an active and confident risk recruitment market where costs and salaries remain broadly under control.

Mature and stable recruitment marketp 75% of risk managers surveyed have worked in risk

management for over 5 years

p 44% have worked in risk management for over 10 years

p Risk managers more likely to be men 83% than women 17%

Recruitment activity picking up p 24% of risk managers have changed job in the last

12 months

p 69% of risk managers moved primarily for career development reasons, with only 20% moving primarily to increase their salary

p Less than 2% of risk managers reported they were not working

Changing job major factor in salary increases p Average salary increase of 20% achieved by risk managers

who changed job in the last year

p 6% salary increase for risk managers who stayed with their existing employer

Value of other benefits increasing Bonuses

p 90% of companies paid bonuses in the last year

p Average bonus equivalent to 28% of basic salary

pensions

p 90% of risk managers benefit from employer pension contributions

p Average employer pension contributions remain equivalent to 9% of basic salary

long term incentive plans

p 21% of risk managers benefit from long term incentive plans

other allowances

p 60% of risk managers benefit from other allowances

p Average value of additional benefits equivalent to £7,900

Satisfaction with remuneration rises when moving job p Overall, 53% of risk managers satisfied with current

remuneration

p 74% satisfaction for risk mangers who have moved in the last year against 47% for those who have not moved

p 54% benefit from flexible working

p Average holiday entitlement remains at 26 days

High level of satisfaction amongst contractors who are workingp 91% of contractors content with current contract

p 89% believe they are adequately compensated

p Clear difference in sentiment between those in work and those looking for work

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What best describes your salary increase in the last year?

Analysing the average increase tells a different story particularly when compared to 2013. last year, 43% of risk managers reported that they received no increase in their base salary against only 30% this year. Given the rebound in the economy, it is surprising that so many risk managers continue to report that they received no salary increase. We can only assume that the question is backward rather than forward looking and will produce a more positive result next year. Also, given that last year 23% of respondents reported a salary increase in excess of 10% against only 20% in 2014, it would appear that fewer risk managers have benefited from the larger salary increases that are usually associated with promotions.

Salary increases achieved by changing employer The Survey indicates that the average salary increase achieved by risk managers changing job is 20%, slightly up from 19% last year. Risk managers have been in a stronger bargaining position in 2014 than in 2013, when companies found it was becoming more difficult to recruit and also that good candidates were receiving multiple offers.

There is a significant difference between the 20% increase in salary achieved by changing job and the 6% average achieved by staying with an existing employer. However, analysing the average, as we did last year, reveals a wide range of outcomes. It is particularly instructive that whilst 20% may be taken as the average, only 22% of risk managers actually accepted a salary increase between 10% and 20%. there are a wide range of considerations that go into the decision to accept a position and, whatever the resulting salary increase, the results of our Survey indicate it is unlikely to be the average of 20%.

2 overview

The UK economy is enjoying a robust recovery which is benefiting the financial services industry. Whilst risk managers are more likely to change employer, the results of our survey indicate that companies have continued to control costs. Salary increases and bonuses available either through staying with existing employers or by changing job remain broadly consistent with last year.

Motivation for entering the recruitment market This analysis looks at what motivated risk managers to change employer in the last 12 months. Career development is clearly the main driver with 69% of risk managers citing it as their primary motive. Although 30% of risk managers reported they did not receive a salary increase, salary was the primary motivation for only 20% of risk managers entering the recruitment market, down from 29% in 2013. Only 5% cited job security which is a multi year low. Whilst 74% of men cited career development as their primary motive, it was the primary motivation for only 57% of women, where 29% reported a better work / life balance to be their principle motivation. Interestingly, whilst more women than men report that they are dissatisfied with their salary, unlike men, few women report it to be their primary motivation for changing job.

motivation for entering the recruitment market

Whilst salary is not the primary motive for risk managers seeking another job, they will almost invariably use the opportunity to better their salary and our survey indicated that 74% of risk managers who had changed employer in the last 12 months were now content with their salary, against only 47% who had not changed employer.

Salary increases achieved by risk managers who stayed with their employerAccording to our Survey, the average increase for risk managers who stayed with their existing employer is unchanged at 6%. Whilst the headline rate is perhaps unsurprising, averages can be misleading. For example, a number of the people who stayed with their employer will have benefited from promotions or, when going to resign, buy-backs.

The same

0 - 2.5%

2.5 - 5%

5 - 10%

10 - 15%

Over 15%

2014 30% 13% 19% 18% 7% 13%2013 43% 8% 9% 17% 7% 16%

Career development 69%Salary 20%Better work / life balance 6%Job security 5%

June 2011

June 2012

June2013

June2014

17% 16% 19% 20%

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of their market worth. If candidates are going to move, although it may not be their primary motivation, they expect it to be financially beneficial. As a consequence, companies are more likely to make realistic offers. This is consistent with both the salary increases being achieved in the recruitment market and the fall in the number of defensive registrations.

Salary v Remuneration Whilst base salaries always catch the headlines, offers of employment invariably include other benefits. On average, these additional benefits make up over 30% of total remuneration. Here is an overview of the other benefits that risk managers might expect to receive.

BonusesWhilst salary increases have remained static at 6% during the last year, bonus payments have been rising. Overall, 90% of risk managers reported they worked for a company that paid a bonus, albeit only up 1% from 89% last year. The average bonus paid in 2014 was reported to be 28%, up from 26% in 2013. Of those who received a bonus, 40% reported an increase with only 16% reporting a reduction. Bonuses, whilst potentially a good way of retaining and motivating staff, are rarely an efficient way of attracting them.

Bonuses are often non contractual, often discretionary and may be paid on the basis of corporate or personal performance or a combination of the two. There can also be a qualifying period.

An issue with bonuses is that whilst a risk manager entering the recruitment market who has benefited from a bonus may add it to their base salary, they are more inclined to discount bonuses when discussing expected salary. This goes some way to explaining what can otherwise be relatively high increases in the base salaries achieved by risk managers moving between employers.

Bonuses vary considerably. From our most Survey, 22% of risk managers reported they received a bonus in excess of 30% of their base salary and 9% received over 60%. 76% of bonuses were paid in cash and only 18% were subject to any deferral. 21% of risk managers reported that they potentially benefited from a long term incentive plan

Bonuses in risk management make up a more significant portion of remuneration than in other areas of corporate governance surveyed by Barclay Simpson.

the main difference between 2013 and 2014 is the significant difference between the 11% of risk mangers who moved for the same or less basic salary against the 19% who did so in 2013. It might seem curious that even 11% of risk managers would move for the same or less, particularly because so few were redundant or facing the threat of redundancy. For some this is the result of relocation, for example a move away from London (and in the case of increases a move to London) or perhaps the opportunity to work in a new sector. Others are prepared to accept a better work life balance. Equally, whilst base salary is the most compelling element of any offer, there are other benefits such as pensions, bonuses and holiday entitlement.

49% of risk managers achieved an increase of over 20% which is not significantly ahead of the 46% who achieved a similar increase 2013. In terms of the salary increases risk managers can command by changing employer, the risk recruitment market is a diverse place. There is clearly a huge difference in what companies are prepared to pay for risk managers with in demand skill sets, particularly for those who combine them with commercial savvy and effective communication skills.

Offers rejected as deemed too low An insightful statistic is the number of offers that are rejected for being too low. That is the percentage of risk managers who have rejected an offer they would have otherwise accepted simply on the basis of salary. It represents the propensity of prospective employers to make realistic offers rather than simply opportunistic ones. It also provides some insight into how risk managers view their bargaining power.

offers rejected as deemed too low

Having fallen significantly in 2012, the percentage of offers being rejected for being too low rose and has remained relatively flat in 2014. Companies generally recognise when the risk managers they wish to employ are in short supply and candidates have become more secure and assertive in respect

Bonuses vary considerably. From our most recent survey, 22% of risk managers report they received a bonus in excess of 40% of their base salary, of which 9% received over 60%.

“Less or the same

0 - 10%

10 - 20%

20 - 30%

30 - 40%

Over 40%

2014 11% 19% 21% 23% 7% 19%2013 19% 13% 22% 17% 12% 17%

2011 2012 2013 2014

26% 16% 21% 20%

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loans in London, gym membership, subsidised dental care, personal and accident insurance and staff discounts. These are generally low value benefits.

Flexible benefits This refers to schemes where employees are offered limited core benefits in addition to their base salary. This addition can either be taken as salary or employees can choose to buy from a menu of additional benefits. These schemes became popular 10 years ago, particularly in the accounting profession, but have not been universally adopted.

Holiday entitlement 40% of risk managers surveyed receive 25 days holiday, with 61% getting between 25 and 28 days holiday. the average number of days holiday survey-wide is 26 days. Holiday entitlement, regardless of sector, is more likely to be enhanced by the number of years worked rather than seniority. As a strategy it represents a good way of rewarding loyalty and retaining staff but a poor way of attracting new employees.

An increasingly popular benefit is to provide employees with the opportunity to buy additional holidays. This is usually limited to an additional 5 days and would be purchased through salary sacrifice.

Flexible working Flexible working is popular. 54% of risk managers report that they benefit from some form of flexible working, up from 53% in 2013. it is most common in retail banking. Flexible working appears to be something that risk managers are more prepared to negotiate on when changing jobs. The results of our Survey indicate that risk managers who have changed job in the last 12 months are more likely to benefit from flexible working than those who have not. 71% of women report that they benefit from flexible working, against just 50% of men.

Employers are ultimately more concerned with output rather than simply attendance. Flexible working is an effective means of retaining staff and few employees once they have benefited from it would be prepared to give it up. We anticipate that this will ultimately become a more universal benefit.

Pensions For new recruits, final salary pensions no longer exist in the private sector. For those who still benefit from such schemes, there is a full appreciation of their value and that the cost of giving it up to join a new employer would be prohibitively expensive.

90% of risk managers benefit from employer pension contributions and in the last year the average employer pension contribution stayed constant at 9% of basic salary. The typical employer pension contribution is in the range of 5-10%. Pension schemes in the private sector are invariably money purchase where the company commits to making a contribution based on a percentage of salary. Whilst there is often a short qualifying period before contributions commence, a period in excess of six months would be considered unusual.

Most arrangements require the employer to make a contribution based upon a fixed percentage of base salary. The employee may or may not be required to match it. Frequently, employers will be prepared to match additional contributions made by the employee up to a fixed percentage. The percentage may increase with the age of the employee, their years of service and their level of seniority.

Other benefits60% of risk managers reported they received other benefits in 2014, with an average value of those benefits rising from £7,600 in 2013 to £7,900 in 2014.

Cars or car allowances have become a less common benefit. They can still be expected where a role requires significant travel and also for senior hires. In terms of overall remuneration, a car allowance is frequently offered in lieu of a car and is often considered as non pensionable salary when evaluating overall remuneration. A more common benefit for those working in London is a location allowance. This is a supplement for those working in London to cover the increased cost of either living in or commuting to London. The most valuable other benefit is Critical Illness Cover which is expensive to provide and is usually restricted to senior roles. However, Private Health Insurance is common and is often extended to all immediate family members.

Life assurance, usually linked to a pension scheme, is normal, as is payment of at least one professional subscription. Other benefits may include season ticket

54% of risk managers report that they benefit from some form of flexible working, up from 53% in 2013. It is most common in retail banking.

“

9

3 General Results

General results Market characterised by high level of experience p 75% of risk managers surveyed

have worked in risk management for over 5 years (76% in 2013)

p 43% have worked in risk management for over 10 years (40% in 2013)

p 53% of risk managers report they have management responsibility

How long have you worked in risk management?

Do you have management responsibilty?

Recruitment activity picking up

Bonuses Bonuses up on 2013

p 24% of risk managers reported they had changed job in the last 12 months (21% in 2013)

p Risk managers at Vp level most active

p 90% of employers paid a bonus in 2014 (89% in 2013)

p average bonus equivalent to 28% of basic salary (26% in 2013)

p 40% reporting a higher bonus in 2014

p 40% of risk managers received a bonus between 5-20%

Have you changed job in the last 12 months?

How does your bonus compare to last year?

p Risk managers working in insurance and consultancy most likely to have moved whilst those working in corporate and investment banking least likely

p Operational risk managers were most likely to have moved against credit risk managers who were least likely

p Risk managers on lower salaries more likely to have moved, although no difference between managers and non managers

Which of these as a percentage of your salary best describes your last bonus?

Please note that the figures in this report cannot be extrapolated across everyone who works in risk management, as the sample consists of people registered with Barclay Simpson. However, the figures do substantiate our experience of the market and the year on year comparisons are clearly representative.

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Bonus payments mainly paid in cash

p 76% of bonuses paid in cash (78% in 2013)

p 18% of bonus was deferred (22% in 2013)

p 21% of risk managers benefit from long term incentive plans (37% of managers against 12% of non managers)

Do you benefit from any long term incentive plan?

What percentage of your bonus was paid in cash?

pensions Pension a key part of total remuneration

p 90% of risk managers surveyed benefit from employer pension contributions (89% in 2013)

p average value of pension contributions remain at 9%

p Typical pension contribution in the 5-10% range

Does your employer provide you with any pension benefits?

Salary % contribution to pension from your employer

other benefitsValue of other benefits becoming ever more significant

p 60% of risk managers surveyed received other benefits (48% in 2013)

p average value of other benefits to those who received them up to £7,900 (£7,600 in 2013)

What is the approximate monetary value of other benefits?

p Managers more likely to receive other benefits and for them to be of higher value than for non managers

p Value of other benefits increases with years of service

p Other benefits more common and valuable in banking than in other sectors

holiday entitlementAverage holiday entitlement highest in retail bankingp For 40% of respondents 25

days remains the most common entitlement

p 61% of respondents have between 25-28 days

p only 14% of respondents have less than 25 days holiday

p Average holiday entitlement remains at 26 days

What is your holiday entitlement in days?

p Most generous holiday entitlement given to risk managers in retail banking with 42% getting at least 30 days

p Number of days holiday is consistent between size of company and management, although rises to an average of 27 days for risk managers with over 10 years experience

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Flexible workingWomen more likely to benefit from flexible working

p overall, flexible working is up to 54% (53% in 2013)

p no difference in flexible working between size of company

p Flexible working more prevalent amongst managers and the higher paid

Does your employer provide you with the opportunity to work flexibly?

p 71% of women report they work flexibly against 50% of men

p 61% of risk managers who have changed employer in the last year allowed to work flexibly against 51% who have not

p Flexible working most common in retail banking and least common in investment banking

content with compensation?Changing job has big effectp overall, 53% believe they are

adequately compensated against (51% in 2013)

p Significantly higher levels of contentment from those working in smaller companies

p Contentment moves higher as salary level increases

Overall do you think you are adequately compensated?

p 74% of risk managers who have changed job in the last 12 months are content against only 47% who have not

p 71% of risk managers working in asset management are content, significantly higher than any other sector

p At 47%, lowest in investment bankingp Managers more content than non

managers and men are more content than women

contractors in workContractors finding work quickly, but are not complacent

Interim Compensation Survey

p only 40% of contractors in work believe market for their skills is improving (77% in 2013)

p clear difference between contractors in work and those who are not

Do you think the market for your skills is improving or deteriorating?

p 78% of risk managers started a new contract within one month (64% in 2013)

p as in 2013, no risk managers have taken over 12 months to find a contract

How quickly were you able to secure your current contract?

12

Generally positive picture on rates of pay

p Fewer risk managers (37%) reporting an increase (57% in 2013)

p However no risk managers report a decrease

p Vast majority believe they are adequately compensated

p 91% satisfaction for contractors is well ahead of 53% for permanent

Do you believe you are adequately compensated?

Which best describes how your current rate compares with your previous?

p rate of pay remains most important factor

p type of work surprisingly important

p High level of satisfaction with existing roles

p However, experienced contractors who are not will have already moved

Are you satisfied with your current contract?

When considering a new contract what is the most important consideration?

High level of satisfaction for contractors in work

Longer contracts still the norm

p 51% of contracts have lasted over 6 months

p only 5% of risk managers have been in contract for less than 1 month

p only 14% of contracts less than 3 months

p Contracts generally run for longer than anticipated

What is the anticipated length of your current contract?

How long have you been in your existing contract?

contractors looking for workPicture clearly less positive, but still optimistic

p only 28% of contractors believe market is improving

p 40% finding it more difficult than anticipated

Are you finding securing a contract more or less difficult than anticipated?

How long have you been seeking a contract?

Do you think the market for your skills is improving or deteriorating?

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SAlARy GuIdANCE

4 Salary Guide

Barclay Simpson analyses the salary data that accumulates from the placements we make in the uK. This provides a guide to salaries for internal audit professionals.

The salary ranges quoted are for good rather than exceptional individuals and take no account of other benefits in addition to salary, such as bonuses, profit sharing arrangements and pension benefits.

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CoRpoRATE INVESTMENT BANKING - CREdIT RISK RANGE AVERAGE

Graduate / Junior Analyst (0-12 mths) £25 – £40,000 £32,500

Analyst (2-3 years) £35 – £50,000 £42,500

Associate vice President (3-6 years) £45 – £70,000 £57,500

vice President (6-9 years) £75 – £110,000 £80,000

Director (9-12 years) £110 – £150,000 £95,000

Head of Credit £100 – £150,000 £125,000

Chief Credit Officer £140 – £250,000 £195,000

Managing Director £150 – £250,000 £200,000

CoRpoRATE INVESTMENT BANKING - opERATIoNAl RISK RANGE AVERAGE

Graduate / Junior Analyst (0-12 mths) £25 – £35,000 £30,000

Analyst (2-3 years) £30 – £55,000 £45,000

Associate vice President (3-6 years) £45 – £70,000 £57,500

vice President (6-9 years) £65 – £100,000 £85,000

Director (9-12 years) £90 – £110,000 £100,000

Executive Director / Senior vice President (12+ years) £100 – £170,000 £135,000

MD / Head of Operational Risk £110 – £300,000 £205,000

Managing Director £200 – £300,000 £250,000

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CoRpoRATE INVESTMENT BANKING - MARKET RISK RANGE AVERAGE

Graduate / Junior Analyst (0-12 mths) £40 – £60,000 £50,000

Analyst (2-3 years) £50 – £75,000 £62,500

Associate vice President (3-6 years) £50 – £90,000 £70,000

vice President (6-9 years) £80 – £110,000 £95,000

Director (9-12 years) £100 – £150,000 £107,500

Head of Market Risk £100 – £200,000 £150,000

Managing Director £150 – £300,000 £225,000

RETAIl BANKING - CREdIT RISK RANGE AVERAGE

Junior Analyst (0-12 mths) £22 – £28,000 £25,000

Analyst (2-3 years) £25 – £35,000 £30,000

RETAIl BANKING - CREdIT RISK RANGE AVERAGE

Senior Analyst (3-6 years) £30 – £40,000 £35,000

Manager (6-9 years) £35 – £55,000 £45,000

Senior Manager (9-12 years) £50 – £75,000 £62,500

Director (12+ years) £75 – 90,000 £82,500

Head of Credit Risk £90 – £120,000 £105,000

RETAIl BANKING - opERATIoNAl RISK RANGE AVERAGE

Analyst (0-12 mths) £20 – £30,000 £25,000

Analyst (2-6 years) £30 – £50,000 £37,500

Manager £45 – £70,000 £57,500

Senior Manager £55 – £90,000 £72,500

Director £75 – £130,000 £102,500

Head of Operational Risk £100 – £200,000 £150,000

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pRIVATE BANKING - CREdIT RISK RANGE AVERAGE

Graduate / Junior Analyst (0-12 mths) £25 – £40,000 £32,500

Analyst (2-3 years) £35 – £50,000 £42,500

Associate vice President (3-6 years) £45 – £65,000 £55,000

vice President (6-9 years) £65 – £85,000 £75,000

Director (9-12 years) £75 – £100,000 £87,500

Head of Credit Risk £100 – £120,000 £110,000

Chief Credit Officer £130 – £175,000 £152,500

pRIVATE BANKING - opERATIoNAl RISK RANGE AVERAGE

Junior Analyst (0-12 mths) £20 – £40,000 £30,000

Analyst (2-3 years) £30 – £50,000 £40,000

Associate vice President (3-6 years) £50 – £70,000 £60,000

vice President (6-9 years) £65 – £90,000 £77,500

Director (9-12 years) £80 – £110,000 £95,000

Head of Operational Risk £100 – £150,000 £125,000

ASSET MANAGEMENT - opERATIoNAl RISK RANGE AVERAGE

Junior Associate (2-3 years) £30 – £50,000 £40,000

Associate vice President (3-6 years) £40 – £60,000 £55,000

vice President (6-9 years) £65 – £100,000 £82,500

Director (9-12 years) £80 – £120,000 £100,000

Head of Operational Risk £100 – £150,000 £125,000

ASSET MANAGEMENT - MARKET / INVESTMENT RISK RANGE AVERAGE

Associate £40 – £70,000 £55,000

vice President £70 – £150,000 £110,000

Director £90 – £175,000 £132,500

Head of Investment Risk £100 – £200,000 £150,000

Chief Risk Officer £200 – £250,000 £225,000

hEdGE fuNd - opERATIoNAl RISK RANGE AVERAGE

Junior Analyst (2-5 years) £50 – £65,000 £57,500

Manager £50 – £65,000 £60,000

Director £55 – £120,000 £100,000

Head of Operational Risk £80 – £150,000 £115,000

hEdGE fuNd - INVESTMENT RISK RANGE AVERAGE

Associate £40 – £70,000 £55,000

vice President £70 – £150,000 £110,000

Director £90 – £175,000 £132,500

Head of Investment Risk £100 – £200,000 £150,000

Chief Risk Officer £200 – £300,000 £250,000

INSuRANCE - RISK RANGE AVERAGE

Analyst £30 – £50,000 £40,000

Manager £40 – £75,000 £57,500

Senior Manager £70 – £110,000 £90,000

Director £100 – £150,000 £125,00

Head of Operational Risk £100 – £175,000 £137,500

Chief Risk Officer £150 – £250,000 £200,000

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ABOuT BARCLAY SIMPSON06Barclay SimpsonBridewell Gate, 9 Bridewell PlaceLondon EC4V 6AWTel: 44 (0)20 7936 2601Email: bs@barclaysimpson.com

If you would like to discuss any aspect of the reports please contact the following divisional heads:

Corporate Governance Adrian Simpson as@barclaysimpson.comInternal & IT Audit Daniel Flynn df@barclaysimpson.comRisk Matt Brown mb@barclaysimpson.comCompliance Tom Boulderstone tgb@barclaysimpson.comSecurity Mark Ampleford ma@barclaysimpson.comLegal Jane Fry jf@barclaysimpson.com

To discuss our regional and international services please contact:

Scotland Liam Hughes lh@barclaysimpson.comEurope Tim Sandwell ts@barclaysimpson.comMiddle East Matt Crocombe mc@barclaysimpson.comAsia Pacific Russell Bunker rb@barclaysimpson.comNorth America Daniel Close dc@barclaysimpson.com

Barclay Simpson is an international corporate governance recruitment consultancy specialising in internal audit, risk, compliance, security, business continuity, legal and treasury appointments. established in 1989, Barclay Simpson works with clients in all sectors throughout the uK, Europe, Middle East, North America and Asia-pacific from our offices in london, edinburgh, new york, Dubai, Hong Kong and Singapore.

We add value by using our unique focus on corporate governance, our highly experienced specialist consultants and access to both the local and international pools of corporate governance talent. our strength lies in our ability to understand client and candidate needs and then to use this insight to ensure our candidates are introduced to positions they want and our clients to the candidates they wish to recruit.

for more in-depth coverage, comprehensive reports and compensation guides exist for the Internal Audit, Risk, Compliance, Security and legal recruitment markets. These can be assessed from the links below.

We also produce other specialist reports, each of which can be accessed for free on our website: www.barclaysimpson.com

www.barclaysimpson.com/2014interimreport/auditwww.barclaysimpson.com/2014interimreport/riskwww.barclaysimpson.com/2014interimreport/compliancewww.barclaysimpson.com/2014interimreport/securitywww.barclaysimpson.com/2014interimreport/legal

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