For over a decade, Rutherford has been predominantly known for its legal and compliance offering to financial services firms, from pre-eminent hedge funds to disruptive fintech startups. But with an increasing demand from clients and the market constantly evolving and adapting to the latest technologies, world events and newly-introduced regulations, Rutherford has made the decision to expand its services to better respond to this ever-changing landscape.
This new offering took the form of the creation of a new specialism, RSO - which stands for Risk, Strategy and Operations. Rutherford decided to explore these three closely-aligned verticals through the depths of the global pandemic as they faced off on a day-to-day basis with our core strengths in legal and compliance as well as our latest offering, cyber and information security.
With a strong track record amongst existing clients, our firm has been asked time and time again through the years if we could support executive hiring processes in new business areas which would fall within the wider Governance, Risk and Compliance (GRC) space. GRC is not a responsibility that just lies within Audit, Compliance or Legal remits; it goes to the very top of our clients’ organisations, including Chief Executive Officer and their executive management teams.
Notable early wins of this newly-introduced specialism included C-Level MD hires at global investment managers, venture capital firms and private equity businesses. Our specialist Recruitment Consultants were able to support clients in these critical leadership processes by going beyond the initial remit and job descriptions - by gaming the evolution of these hires 2,3, and 4 years down the line. With a strong understanding of our clients’ hiring cultures and longer-term strategies, we placed key figures in CEO, COO, CFO and Chief of Staff mandates all whilst working closely with Chief Risk Officers to build new market and liquidity risk functions on both the buy and sell sides.
Across the three verticals, each role brought in various elements of governance to the mandate, partially in response to growing regulatory pressures, and partially in response to the rapidly evolving situation in global markets reacting to major macro events like the conflict in Ukraine or COVID-19. Add in the incredibly volatile history of the crypto and digital space and the market outlook for the next few annual hiring cycles looks positive around the Governance, Risk and Compliance space.
Market Overview: What Has been Happening Within the Space
From a Strategy and Operations standpoint, the market has seen a lot of movement and changes in the past few years. One of these changes: how CFOs are now more than ever tied to Governance, Risk and Compliance rather than being purely strategy-driven.
CFOs are coming under increasing scrutiny when it comes to operational risk and resilience measures in their businesses. High profile failures and scandals that have their roots in finance functions or fiscal irresponsibility are having a deleterious impact on consumer and business confidence. Investors in both public and private markets are turning their attention to fiscal orthodoxy - or at leas fiscal hygiene - when looking at new opportunities. Regulators are also expressing concerns and have started to look at the overall risk picture of the firms they cover – or aggregate risk. This goes beyond traditional financial and non-financial risk areas - market, investment, credit, operational, enterprise, etc. - and includes areas like reputational risk. They are looking to see senior risk holders take proactive steps across their respective verticals to maintain strong risk and resilience frameworks and practices.
In terms of Investment and Middle Office operations, the picture is somewhat more chaotic – though it also makes sense why there has been an increased GRC focus in this vertical. Along with Legal & Compliance, Operations has often been an overlooked vertical in financial services institutions. A positive change in the industry is around the growing awareness that support functions do more than just keep the lights on. The idea of distinct “Front”, “Middle” and “Back” offices is gradually going the way of other archaic practices. As we start to see the broader wholesale financial services market embrace the concept of “Front-to-Back” operations and support functions, GRC responsibilities are being shared equitably across organisations – often down to quite junior employees at Analyst and AVP levels.
As a result, we are seeing that risk is growing as a Subject Matter Expertise requirement in various trade and investment operations functions. This covers technical areas across all asset classes and products. It has an impact on the implementation of new platforms and adoption of new technologies.
Risk, Strategy & Operations: What to Expect
What does this mean going forward? In 2022, the market saw extremes of supply and demand from both clients and candidates. At times, a lack of qualified or experienced talent frustrated hiring managers’ intentions to operate. At others, firms were quickly pulled into expensive bidding wars which were a complete disregard of established norms, with even very junior graduates commanding base salary uplifts of 80-100%*. With the end of year slow down, set against the backdrop of a worsening crypto winter and rumblings of mass lay-offs in the tech sector from the megalithic FAANGS (Meta, Alphabet, etc.), the scene was set for a rather gloomy 2023.
The first half of the year has so far not disappointed the cynics, with the bulge bracket Corporate & Investment banks doubling down on sharp cuts made to M&A practices, with broader swingeing cuts being enacted - adding along the way strong sell-side talent to the c. 40,000 tech professionals unfortunately sitting in the market. With no immediate recovery in sight for the retail oriented fintech and technology players who saw cuts biting through Q2 and Q3 last year – the overall market picture remains gloomy.
However, the picture on the buy-side is somewhat more positive – if not a completely clear bill of health. 2022 saw a significant bloody nose being dealt to the global asset management industry with strong outflows and reactions to extreme market shocks. At one point, the global investment titan BlackRock was down an almost unbelievable US$2 trillion in assets under management, before a remarkable effort saw them recover some $1 trillion of the outflow. With some notable exceptions, asset managers and hedge funds were left feeling somewhat punch drunk after a wild year. Hiring demands as a result are somewhat down on the peaks of 2021 and H1 2022. They are not non-existent though.
GRC functions are seeing increased pressure from both their front office counterparts and regulators. This is maintaining a strong need for quality professionals in these spaces. New updates from the FCA and global counterparts are insulating GRC functions in firms totting up vulnerable headcount, and ring-fencing budget for new growth in those in a better position to invest.
Whilst the somewhat wayward crypto and digital assets verticals remain subdued, many institutional players continue to move forward with their digital asset programmes. The wall-to-wall coverage of the FTX fiasco, and resulting carnage, may have driven some firms to bury their crypto plans. In others – it highlighted a need to get ahead of non-existent regulatory frameworks and to strengthen their own internal frameworks and policies ahead of the looming regulatory changes being forced through around the world.
Well structured, led and resourced GRC functions enable businesses to grow in a sustainable and secure fashion. Most companies have embraced wholesale and aggregate risk concepts and are proactively working with regulators to secure viable growth strategies and products. GRC functions are getting greater buy in at Board level and in executive leadership teams. They are also getting a larger slice of operating expenditure to improve conditions in their teams and attract new talent.
For sell-side professionals, do not give up all hope of a good move this year. Credit, IRRBB and Market Risk functions are still hiring on your side of the fence. If you are in Capital Markets teams or on Electronic trading desks, buy-side firms will continue to show strong interest in the best talent.
It will not be a straightforward year – that’s for sure – but there is a good degree of confidence that for professionals in Risk, Strategy and Operations verticals, the right opportunities to move and grow will continue to come to the market. If you which to discuss trends and their impacts on your current team, business or professional progression, please get in touch with Rutherford’s Recruitment Consultants for a confidential conversation.
Octavian Donnelly is a Risk, Strategy & Operations Managing Consultant at Rutherford, the executive specialists in compliance, legal, risk, strategy, operations and cyber security recruitment.
* If you picked up on that 80-100% uplift point, do note that it will still be possible to push for better compensation when negotiating a move. Increases are less volatile though - hovering around 15-25% on both buy and sell sides.