Apr 05

Survey says: Risk pays, brisk demand

by David Harper, CFA, FRM, CIPM

FRM | Risk |

The executive search firm Risk Talent Associates released the results of their survey on compensation trends among risk professionals employed in the capital markets. Of course pay levels vary by job type (title), experience, and geography (most of their 500 survey respondents are North American), but risk professionals as a group are in brisk demand.

The following shows total compensation (salary plus cash and non-cash incentives) across generic (hierarchical) titles. Annual increases are shown in green percents:

 

Aside from correlations of pay to title (shown above), experience and geography, the survey also says:

  • Investment banks pay the most, where a Managing Director tends to earn more than $1 million in total compensation. Typical risk jobs at investment banks include, roughly in reverse-order of seniority, Market Risk Analyst, Risk Manager (AVP, Director), VP-Credit Risk Management & Portfolio Analytics,  Head of Risk Management, and Managing Director-Risk Measurement and Management
  • The average Chief Risk Officer (CRO) at a commercial bank earns total compensation of $1.15 million
  • Large firms (> 20 employees) pay more than small firms (<20 employees).
  • On average, professionals focused on enterprise risk earned the most, followed by market risk then credit risk.
  • The market for risk talent is vibrant: on the demand side, 35 to 40% say they are looking to hire for growth. On the supply side, fully 72% said they will be "considering changing jobs in the next two years."

I don't need to remind you that these are only benchmarks. Pay is circumstantial. The bottom line is: you are working in the right neighborhood!

The fine folks at Risk Talent Associates were kind enough to field a few questions from the Turtle:

International demand looks strong, too?

"Yes, and it is interesting too that European firms are paying well for operational risk expertise. There is a strong belief that overseas firms are culturally well-suited to take advantage of the emergent emphasis on operational risk." - Daniel Keppie, Public Relations, Risk Talent Associates

How valuable are educational and professionals credentials?

"Firms seek risk managers who have strong academic finance credentials. While many quantitative risk managers have PhD's in physics, statistics, and computer science, the top firms seek individuals with strong academic credentials in finance. MBA's in finance, with rigorous course loads in quantitative finance, from the University of Chicago, Wharton, and NYU, for example, get the attention of hiring managers. Doctorates in finance and econometrics from top US finance institutions are also preferred to non-finance degrees. One top risk professional told me, "I wouldn't expect to run a nuclear facility, so why would I want a nuclear physicist running my portfolio analytics?" - Michael Woodrow, President, Risk Talent Associates

What other trends do you anticipate for aspiring risk professionals?

"Another developing trend is that the quantitative depth required in today's risk managers continues to increase. Financial institutions do not necessarily want pure quants anymore; instead they demand risk managers with both outstanding quantitative and technology skills. So, we might add a technology component to the four skills mentioned above [to their survey]."

"For those individuals who are still early in their careers, a quantitative MBA or a Master's degree in Financial Engineering can be quite valuable. Similarly, technology skills and education in areas such systems development and programming are now coveted in risk management groups. Short of that, taking the time and effort to pass the FRM, PRM, or CFA exams, is beneficial and is noticed by hiring managers."  - Michael Woodrow, President, Risk Talent Associates

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