2011 | Market Reportww1.prweb.com/prfiles/2011/01/25/2926494/BSCorpGov2011.pdf · 06 Outlook Barclay Simpson 2011 Market Report CORPORATE GOVERNANCE London Edinburgh Dubai Hong Kong

2011 | Market ReportCORPORATE GOVERNANCE

Barclay Simpson 2011 Market ReportCORPORATE GOVERNANCE

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CONTENTS

01. Introduction

02 The Economic Environment

03 The Corporate Governance Environment

04 The Recruitment Market

05 Market Reviews

06 Outlook

Barclay Simpson 2011 Market Report

CORPORATE GOVERNANCE London

Edinburgh

Dubai

Hong Kong

Barclay SimpsonBarclay 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, Middle East and Asia Pacific from our offices in London, Edinburgh, Dubai and Hong Kong.


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Welcome to Barclay Simpson’s 2011 Corporate Governance Market Report. This is the 21st year we have produced market reports summarizing and analysing recruitment trends in corporate governance. This report serves to review developments during 2010 and to provide an insight into how the recruitment market for corporate governance will develop during 2011.

Whilst we were cautiously optimistic at the start of 2010, by mid year we were genuinely surprised at the speed of the recovery in the recruitment market in the financial services sector. The recovery had been rapid and comprehensive and demand held up through to the end of 2010. There are now signs that the initial surge of recruitment that can always be expected after a prolonged period of headcount and recruitment freezes is over. A more typical recruitment market, if there is such a thing, is emerging. Recovery in demand from industry and the consultancy sector came later, which is most likely due to these sectors operating in a less rigorous regulatory environment than the financial services sector. Unfortunately for those who work in the public sector, an extended period of austerity is in the process of descending upon it.

We are continuing with the Barclay Simpson recruitment index that was established in the 2010 Interim Report. This Corporate Governance Market Report is designed to provide readers with an overview of the corporate governance recruitment environment and includes summaries of the constituent recruitment markets.

For more in-depth coverage, comprehensive market reports exist for Internal Audit, Compliance, Risk, Security and Legal recruitment markets. These can be assessed online at:www.barclaysimpson.com/internal-audit-2011-market-reportwww.barclaysimpson.com/compliance-2011-market-reportwww.barclaysimpson.com/risk-2011-market-reportwww.barclaysimpson.com/information-security-2011-market-reportwww.barclaysimpson.com/legal-2011-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 020 7936 2601 or [email protected].

01. INTRODUCTION


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We made the point, over a number of years, that cheap money would serve no good purpose. It allowed imbalances and bubbles to develop and the risk taking that ultimately undermined the banking system. Two years on from the demise of Lehman Brothers and the epicentre of the crisis, the global financial system has been sufficiently recapitalised to absorb an orderly workout of its debts. The system remains fragile and anything less than an orderly workout risks contagion and a new credit crunch.

Without doubt the outlook for global growth has improved. However it is widely accepted that the major structural flaw and therefore weakness in the global economy is the unsustainable deficits and surpluses between key trading partners. Whatever the eventual solution to these imbalances, and one will ultimately have to be found, it is not something that currently appears politically feasible.

There is also no recent economic precedent for the sustained low interest rate policy being pursued by Western governments. Whilst increased asset prices and spending are boosting growth, there is less clarity about the longer term potential damage it might do. In fact, to believe that the current monetary laxity will not result in inflation, requires a belief in the ability of central banks to make the type of judgements that they have historically been incapable of making. There is not unreasonably a suspicion that policy makers are attempting to inflate debts away. New asset bubbles are emerging which have the potential to cause further economic dislocation.

Within the UK, growth had become reliant on debt fuelled private consumption and government spending. The former has come to an end and the squeeze on government spending that is about to commence will result in severe reductions in real spending. To counter this the UK economy has to be rebalanced away from consumption towards investment and net trade. Although investment is now growing, it remains below pre crisis levels. In spite of a 20% devaluation in sterling, the trade gap persists. The UK economy clearly needs both structural change and the world economy to rebalance, otherwise the economy risks sinking under the weight of both reduced household and government spending.

The Bank of England’s central projection for the UK remains one of low inflation.

However, the Bank’s credibility is being tested by its repeated failure to meet its inflation remit. Unconventional monetary policy, combined with private sector deleveraging and disagreements over the consequences of fiscal tightening, has rendered economic forecasting almost worthless. Although the economy appears to be out of imminent danger, the current outlook is complicated in a way that it has rarely been. So much depends on the economy continuing to grow. We should perhaps hope for the best, be prepared for the worst and somehow expect the UK and wider world economy to muddle through.

ECONOMIC HIGHLIGHTS

Economic growth in the UK came in slightly below 2% in 2010. It was a better outcome than many had predicted earlier in the year. At the start of 2011 the recovery remains in place but still needs to be tested by the increase in taxes and cuts in government spending that will be a feature of 2011. The median forecast is for growth of 1.9% in 2011.

At 7.7%, unemployment has come off its 16 year highs and total employment is currently at its highest level since February 2009. This is before the potential 500,000 job cuts in the public sector begin to take effect. However unemployment at 2.45 million is significantly below earlier forecasts. The Bank of England continues to remain sanguine about inflation. However, given the 4.7% RPI rate posted in 2010, deflation can no longer be seen as a realistic development within the UK economy. Currently RPI inflation is forecast to be 3.5% in 2011 which is hardly comforting. Inflation still presents a threat to the current low interest rate policy.

The UK budget deficit is currently forecast to grow to £149 billion in 2010/2011. This represents a significant improvement on earlier forecasts and is a result of higher growth, lower unemployment and the early implementation of the government’s austerity plan.

The system remains fragile and anything less than an orderly workout risks contagion and a new credit crunch. “

02. THE ECONOMIC ENVIRONMENT


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The position of most Western economies is similar. Their banking systems remain fragile and the necessary deleveraging process is nowhere near complete. Low interest rates and lax monetary policies, whilst containing the seeds of further problems, are facilitating this process. There has, however, been a shift in focus. Two years ago, the world faced a banking crisis. The agenda of the 2009 group of 20 leading economies was dominated by financial regulation. Then, globally co-ordinated efforts to regulate banks by reducing risk taking, controlling pay and raising regulatory standards were promised. In their more recent meeting in Seoul, financial regulation was only discussed in passing.

As a consequence of over reliance on bubble related tax revenues and socialising the banking sectors debts, Europe is now facing a simmering sovereign debt crisis. Policy makers are finding themselves faced with similar dilemmas to those faced with the banking crisis. They need to patch up the system however they can. There are no easy solutions. As they found with Lehman Brothers, the consequences of disorderly default would be market mayhem and economic dislocation.

So if financial regulation does not enjoy quite the political focus it did, what is the corporate governance environment that we are currently working in?

During the last year, the Financial Stability Board and other relevant institutions have focused their attention on the larger systemically important banks, ensuring appropriate levels of capital and systems of oversight. Unfortunately they have not delivered on their pledges for co-ordinated international action. It has proven difficult and potentially divisive to impose common standards on banks that have clearly different starting points. A raft of fragmented regional and local proposals is the result.

However, the UK whilst initially proposing its own liquidity and remuneration rules has clearly reconsidered its position. The FSA has recently reversed its October 2009 decision and the big banks will now only be required to meet the same liquidity rules as other large global financial services groups. It will ensure a more level playing field between UK banks and the rest of the world.

Globally, the most significant development has been Basel III, the Basel Committee on Banking Supervision’s latest reforms. Basel III requires the phasing in by 2019 of a package of reforms that require a tripling of more strongly defined capital requirements. Whilst these reforms have become essentially a proxy for tougher global regulation, more fundamentally the Dodd-Frank Act was passed in the US. Within two years it aims to curtail risks by outlawing the practice whereby banks can deal in their own capital by engaging in proprietary trading. However, by requiring the banks to hold more capital as a reserve against their trading activities, all forms of trading will become more expensive and less profitable. The argument is therefore whether this is likely to push the risks away from the banks and into the less regulated shadow areas such as hedge funds.

From our perspective, and we made the point in our interim report last year, we have a strong suspicion that aside from making corporate governance in the financial services industry even more expensive (at possibly £2.5billion, it is not cheap), there is a danger that nothing has really changed. We wrote how the directors of Northern Rock, having publicly lied about the circumstances of the bank, were punished by entirely affordable fines and a bar from working in the financial services industry. The FSA has even more recently reported the results of their investigation into the failure of RBS. The failure was the result of “bad decisions” and “not a failure of corporate governance on the part of the board”. It is perhaps difficult to understand how you can investigate a bank that almost caused the collapse of the entire financial system and conclude there was no failure of corporate governance. Perhaps you need something even more damaging?

In our view, as a result of the misreading of the risk banks faced, when it really mattered, corporate governance failed.

“As a consequence of over reliance on bubble related tax revenues and socialising the banking sectors debts, Europe is now facing a simmering sovereign debt crisis.

03. THE CORPORATE GOVERNANCE ENVIRONMENT


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We have no doubt that Sir Fred Goodwin, an accountant and auditor by training, was most likely completely focused on the day to day control of RBS. After all, he had armies of people to help him. At one level, and like so many other banks, RBS had a well developed control culture. It was just that when, or more specifically where, it was most needed - at the highest level of decision making - the crucial element of control was missing.

We have previously made the point that if the banks were unaware of the risks they were taking, what chance do regulators have? Serious reform really requires a realistic assessment of what regulators can actually achieve. Regulating structures, activities and compliance with procedures is far easier than assessing the risk management strategies of banking conglomerates. Whatever the future, public underwriting of banking activities should be limited to those areas in which the wider public interests actually lie - in retail rather than investment banking activities. There is demonstrably no easy solution. However, a financial system made up of smaller, diverse institutions with differing business models, where each is being left to fail should they not properly assess their risks, is politically more acceptable. Appropriate corporate governance procedures would no doubt be further enhanced if real penalties were to be made available against those who had behaved recklessly and endangered more than their own financial well being. We believe that whatever the carrots and sticks, executive management should be left wanting to have corporate governance functions rather than simply believing they need to comply with regulatory requirements. It works much better like that.

Within the UK, as we can see from their recruitment activity, banks have already started to prepare for tougher capital, liquidity and insolvency rules. These are likely to be imposed regardless of Basel III requirements and timetables. Regulators are currently talking about shifting their attention to shadow banking institutions, where Adair Turner the Chairman of the FSA has promised more scrutiny. However, in reality, regulatory fatigue may be starting to set in as governments increasingly focus on the political consequences of cleaning up their sovereign debts.

In 2011 the FSA will complete the process of informally dividing into two shadow structures

in preparation for a formal legal division in 2012. The Bank of England will have responsibility for macro-prudential regulation, alongside two new regulators. There will be a Prudential Regulatory Authority (under the Bank) and a Consumer Protection and Markets Authority. Before then, the FSA will have handed down fines approaching £100 million during 2010. This will almost triple the £35 million handed down in 2009. It reflects a renewed focus on enforcement, which together with the banks’ Basel III and the insurance industry’s Solvency II related commitments, is underpinning the recruitment of corporate governance staff.

It would be easy to conclude that corporate governance is simply the preserve of the financial services industry. Whilst it is certainly the largest employer, internal auditors, risk management and information security practitioners are employed throughout other sectors of the economy. The failure of corporate governance in the banking sector should not detract from the successful evolution of corporate governance throughout the rest of the economy. Further developments were made during 2010 with both a revised Corporate Governance Code and a new Stewardship Code. The new code is a set of principles released by the Financial Reporting Council. It is directed at institutional investors with the aim of making them engage in corporate governance on behalf of their investors. It adopts the same “comply or explain” approach used in the Corporate Governance code.

The ongoing development of corporate governance in the UK has resulted in standards that are certainly amongst the highest in the world. A recent survey by Resources Global would put just two of the largest European companies in the top 25 of the FTSE 100. In addition as the Financial Times has noted, the financial services sector performed much better during 2010. Given the level of investment that has been made in corporate governance by the UK’s financial services industry it is perhaps not surprising that banks and insurance companies make up 8 of the top 25 companies compared with just 2 in 2009.

Given the level of investment in corporate governance during 2010 and the impetus to continue to recruit into 2011, governance in the financial services sector cannot be seen to fail again. Call us cynical, even at a cost of £2.5 billion a year, at some time in the future it almost certainly will.

“The ongoing development of corporate governance in the UK has resulted in standards that are certainly amongst the highest in the world.


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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 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. The imbalance has resulted in the financial services sector coming to dominate the corporate governance recruitment market. This has never been clearer than during the course of the last year. Demand surged in financial services, in many instances to pre-crisis levels. In industry and the consultancy sector, the recovery has taken longer. 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.

We reported at the start of 2010 that whilst the financial sector crisis and recession had resulted in a collapse in demand, redundancies had been lower than we would have otherwise anticipated. At the start of 2010 demand was patchy and confined to the larger banks that had undergone significant reorganization and from smaller and medium sized commercial groups that due to their limited size had a pressing need to recruit. Demand from the consultancy sector was negligible whilst public sector recruitment, which had held up during the worst effects of the recession, was falling.

We anticipated that the recovery in demand would be cautious and slowly broaden out as the year developed. As we admitted in our Interim Market Report we have been surprised by the outturn.

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 July 2009 at 52, having halved from the onset of the recession in April 2008, to stand at 117 by June 2010 and 115 by December 2010. Demand during 2010 has plateaued at a little over pre-crisis levels.

As we discussed in the interim report demand is made up of three elements. First, deferred demand caused by the seizure in the recruitment market. The recruitment freezes that were common during the recession resulted in large numbers of positions going unfilled. Once confidence returns, these are the positions that are filled first. Secondly, ongoing sustainable demand. This is the usual demand that any given recruitment market generates as people are either internally promoted or move between employers. Third, expansionary demand which is generated from increases in the number of people employed.

It is worth reviewing these three elements of demand in more detail between the various sectors.

The financial services sector benefited hugely from deferred demand in the first six months of 2010, as many departments filled vacancies that had gone unfilled during the recession.

“The financial services sector benefited hugely from deferred demand in the first six months of 2010.

04. THE RECRUITMENT MARKET

Dec

200

7

0

20

40

60

80

100

120

140

Mar

200

8

Jun

200

8

Sep

200

8

Dec

200

8

Mar

200

9

Jun

200

9

Sep

200

9

Dec

200

9

Mar

201

0

Jun

201

0

THE BARCLAy SIMPSON UK CORPORATE GOVERNANCE RECRUITMENT INDEx


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This effect is now complete. Fortunately as confidence has returned, sustainable demand is clearly evident as corporate governance staff have begun to circulate in the market. A further powerful influence is expansionary demand. Many of the larger banks are increasing the number of corporate governance staff they employ. The net effect is that demand in the financial sector remained strong in the second half of 2010 and is set to continue into 2011. Ultimately we expect expansionary demand to fall back in the same way that deferred demand has done. By then, we expect sustainable demand to be broadly back to pre-recession levels.

Demand in industry and commerce remains below pre-recession levels. This is surprising given the strong recovery in profits and rising levels of investment. Many smaller, UK centric business groups responded to deferred demand and recruited during the latter half of 2009 and in 2010 by filling positions left vacant during the recession. It was only towards the last few weeks of 2010 that larger multinational groups that make up the bulk of demand returned to the recruitment market in the same way. These vacancies had existed for many months. They had most likely remained cautious about the sustainability of the recovery and did not wish to be embarrassed by any premature recruitment. Reassurance may be found from the recovery from the last major recession in the early 1990’s. Demand in industry and commerce took at least two years to recover. We hope that as deferred demand fades during 2011, sustainable demand will grow as there is no evidence that companies in industry and commerce are looking to grow the number of corporate governance staff they employ.

Demand for corporate governance expertise from the consultancy sector grew strongly in the second half of 2010. The consultancy sector needs to balance its resources with the demand for its services. Having survived the recession, without making significant redundancies, strong sustainable and expansionary demand is likely in 2011.

Not surprisingly, demand from the public sector has fallen away. Whilst there is little indication of widespread redundancies, enquiries from corporate governance staff working in the sector are rising. Given the government’s austerity measures, there is no realistic prospects that demand in the public sector is likely to rise in the foreseeable future. For those working in the sector, as promotional prospects are curtailed, they may be comforted by the fact that nothing lasts forever.

Given the predominance of the financial sector and growth in the consultancy sector it begs the question where the people with the necessary skills and experience will be found. There has never been a satisfactory solution to the conundrum of where experienced corporate governance staff should come from. Few financial services groups run formal training programs for existing staff or contemplate recruiting people who require training. Given the vast resources being spent on corporate governance within the financial services sector perhaps greater industry wide attention and cooperation should be given to finding a solution.

Given present trends, 2011 will most likely be a year when the recruitment of appropriately skilled corporate governance staff will become an even greater challenge.

“Given the government’s austerity measures, there is no realistic prospects that demand in the public sector is likely to rise in the foreseeable future.


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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


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Market Review – Internal AuditInternal Audit Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010

New vacancies 58 29 46 68 73

Closing vacancies 23 17 24 35 38

Candidates registering 242 226 274 296 276

Defensive registrations 28% 23% 19% 15% 14%

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

Demand from the consultancy sector has recovered and is likely to provide substantial demand in 2011. “

VACANCIES

At 73, vacancies in the second half of 2010 were up against the 68 recorded for the first six months of 2010. Whilst the overall demand for internal auditors is still slightly below pre recession levels, it has substantially recovered from the lows of 2009. Until the last few weeks of 2010 demand had been heavily skewed towards financial services. However in the final weeks of 2010 there was a noticeable increase in demand from industry and commerce which we believe will be sustained into 2011. This demand is from not only the smaller UK centric internal audit departments that needed to recruit earlier in the year, but the internal audit departments of multinational groups. Whilst they had previously been recruiting specialist internal auditors, they are now recruiting internal auditors with generic audit skills and experience. It appears that vacancies that had remained open as a result of recruitment freezes and general uncertainty during the recession are now being actively filled. Overall the total number of internal auditors employed in the economy is rising. This is being driven by the financial services sector and more recently by the consultancy sector. Given a benign economy we would expect demand in industry and commerce to continue its recovery during the course of 2011. Whilst the number of internal auditors employed in the public sector will fall, to date, there have not been large scale redundancies. At 38, current vacancies are back at pre recessionary levels. It is indicative that in spite of the wider unemployment in the economy, the skills and experience that many employers are seeking are in short supply.

REGISTRATIONS

At 14% defensive registrations are at historically low levels. Redundancies were low during the recession and if internal auditors believed they were not going to be made redundant then, there is far less likelihood they will now. The exception is the public sector where defensive registrations are rising. Internal auditors within the sector are looking to recruitment consultancies to help establish their marketability in the light of their potential redundancy. At 276 the number of candidate registrations fell back in the second half of 2010. A likely explanation is that over the long term the rate at which internal auditors enter the recruitment market should remain constant. The flow is curtailed during a recession when people not unreasonably become cautious about changing employer. It then rapidly recovers when economic conditions improve as those who delayed entry into the recruitment market make the decision to move. This most likely occurred in the first half of 2010 and a more natural flow is currently becoming established.

SALARIES

The average salary increase achieved by internal auditors changing jobs rose from 14% to 15%, still close to its long term average. Recruitment activity was heavily skewed towards the financial sector during 2010 and competition for those with the required skills and experience was often intense. If the financial sector is taken out then the average falls to just over 11% which is perhaps more representative of the caution that remains prevalent in the wider economy.

The increase in demand for internal auditors that was evident in the first half of 2010 was sustained in the second half of the year. The financial sector was primarily responsible for this increase. Demand from industry and commerce only recovered towards the end of the year. The multinational groups that provide the majority of the aggregate demand were still reticent to recruit up until the last few weeks of 2010. Although not covered in this survey, demand from the consultancy sector has recovered and is likely to provide substantial demand in 2011. Demand from the public sector, as might be expected, is now largely absent from the recruitment market.


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Market Review – Information SecurityInformation Security Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010






VACANCIES

At 56 the number of vacancies generated in the second half of 2010 fell back marginally from the first half of 2010. However, in many respects the second half of the year represented a healthier recruitment market. Whilst there were fewer vacancies they were spread across more sectors and many more companies rather than being concentrated amongst the retail banks as they were in the first half of the year. The number of outstanding vacancies increased from 31 to 38.

Unlike earlier periods when companies had vacancies but were seemingly doing little to recruit them, a high proportion of the current vacancies are being actively recruited. The rise is indicative of the renewed difficulty that employers are now experiencing in filling their vacancies. There is perhaps also an element of caution with many employers focused on recruiting candidates with a close match to their requirements. Memories of the recession and perhaps having to make redundancies are still fresh in the minds of many recruiters.

We have come to recognise that the information security market can seemly quickly change. Pools of redundant information security practitioners can develop as investment and the economy declines and then rapidly dissipate as the economy improves.

CANDIDATE REGISTRATIONS

2010 started with a large pool of redundant candidates that had built up over the previous two years. Defensive registrations during the first half of 2009 had reached over 50%. As this pool has dissipated candidate registrations, outside of the public sector, are now dominated by those who are not under a threat of losing their jobs. Consequently whilst the number of candidate registrations has fallen, the overall quality of those candidates who have registered has been rising. Equally these candidates are under no pressure to move and can therefore be suitably discriminating in their search for a new position.

SALARIES

The salary increase achieved by information security practitioners changing employer fell back from 12% in the first half of 2010 to 11% in the second half. Earlier in the year there was a process of catch-up where those who had accepted lower salaries took the opportunity in the improved recruitment market to secure more realistic salaries. Whilst developments in the public sector have the potential to depress salaries in 2011, we are expecting the average salary increase achieved in the recruitment market to remain around the historic 10% level. This may be tested by those companies determined to secure the services of candidates with specialist skills.

The increase in demand for information security practitioners that was evident from the financial services sector in the first half of 2010 broadened out during the second half of the year. Demand from the consultancies and system integrators started to fully respond to the economic recovery from mid year and from end users in industry and commerce towards the end of 2010. Unfortunately prospects for those working in the public sector are now uncertain. It is encouraging for many information security practitioners that the pool of redundant people has substantially dissipated. It is perhaps less encouraging for those who are looking to recruit. By the end of 2010, certainly amongst the more marketable of those looking for new positions, it was not unusual for them to receive multiple offers. Employers are once again, having to ensure their recruitment processes are effective. They need to identify and respond to the candidates they wish to recruit quickly and efficiently.

Employers are once again, having to ensure their recruitment processes are effective. “


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Market Review – Risk Management

Risk Management Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010

New vacancies 53 56 102 140 136





Candidate shortages are a feature of the current recruitment market and this will almost certainly continue on through 2011. “

In our 2010 Interim Market Report, we admitted that the speed of the turnaround in the risk management recruitment market had taken us by surprise. By the end of 2010, the market was very different to the one at the start of the year. We are now seeing widespread demand across every sector of the financial services industry and the pool of redundant risk managers has broadly dissipated. The market, in the space of less than a year, has returned to almost pre-crisis levels of activity. Many of the better risk managers are receiving multiple offers, together with ‘buy backs’ (increased offers) from their existing employers. However, it is also clear how delicately both the economy and financial system is currently balanced. Candidates are still making decisions with an element of caution, that did not exist before it was widely realised how badly things could go wrong. This is perhaps not a bad thing. Should risk management fail as spectacularly as it did over the last few years, it is unlikely that it would be given a third chance. The financial services industry, in anything like its current form, would no longer exist.

VACANCIES

The number of vacancies registered in the second half of 2010 was significantly higher than in 2009, but lower than in the first half of this year. The number of outstanding vacancies has increased and reflects the greater difficulty companies are having in filling their vacancies. Whatever the market conditions, it is clear that few companies are both prepared to compromise on the quality of staff they are looking for and the skills and experience they require. The banking sector is by far the largest contributor to these figures, with many institutions recruiting numerous roles across their risk functions.

The market is in the process of changing. Earlier in the year demand was driven by both vacancies that had gone unfilled as a result of recruitment freezes and by genuine growth in the number of risk managers that financial services companies wished to employ. The former are now substantially filled and the initial surge in recruitment that occurs after a recession is now over. New positions are still emerging, driven by Solvency II, Basel III and the enhanced regulatory oversight of the shadow banking sector. However, their number is likely to decline and demand will become increasingly being driven by the usual circulation of risk managers through and between companies. This said, we are still confident that this demand will be sufficient to generate a healthy risk recruitment market in 2011.


Most candidates are now entering the recruitment market for the more prosaic reasons of career development rather than through the fear of redundancy. Candidate registrations in the first half of the year were strong, but lower than in 2009. They have since declined further, partially caused by many candidates preferring not to move at the end of a year and missing their expected bonus payments. Those risk managers who had their career moves frustrated by the recession, had most likely entered the recruitment market earlier in the year. Candidate shortages are a feature of the current recruitment market and this will almost certainly continue on through 2011.

SALARIES

The salary increases achieved by risk managers rose to 19% in the second half of 2010, up from 9% in the same period in 2009 and 17% in the first half of 2010. This is now nearing the 20% plus salary increases usual in the pre-crisis era. Given that salary is most often simply a function of supply and demand, we should not be surprised. However, we are also seeing a number of financial services groups showing an element of restraint on salaries, with far more prepared to sell the quality of their opportunities. This is a key consideration for candidates and, given recent developments, a secure role with good prospects may well be preferred against one with simply a higher salary.


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Market Review – Compliance

Compliance Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010






For those with the necessary skills, there has probably never been a better time to secure another position in compliance.“

The recovery in the compliance recruitment market that started towards the end of 2009 and rapidly gathered pace during the first quarter of 2010 was sustained throughout the year. Demand for compliance staff is now exceeding pre-crisis levels and the reason for this is clear. It is the result of not only increased UK and EU regulation, but also the more aggressive regulatory oversight currently pursued by the FSA. In response, significant numbers of not only new positions but whole new teams are being 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? Whilst a highly accommodative monetary policy is helping promote the profitability of the banks and wider financial services industry, the cost of regulation is becoming increasingly burdensome. Given the increase in demand for compliance staff and the limited pool of expertise, it is not surprising that salaries and the cost of recruiting and employing the necessary people is rising.

VACANCIES

The number of new vacancies fell marginally from 151 in the first half of 2010 to 147 in the second half but still remains at record levels. Demand is coming from all sectors but is particularly strong from retail and corporate banking. We are seeing demand from both London based institutions and those based throughout the UK. The vacancies are covering all levels of experience, from entry level to Head of Compliance. Departments are also frequently becoming more specialist, with new positions such as “Head of Sanctions and Anti Bribery and Corruption” and many companies currently have multiple vacancies open at the same time. These vacancies are being driven by a combination of factors, including: the ‘fear factor’ engendered by more aggressive oversight; new regulation and, for those groups that were merged, the result of their post integration compliance requirements becoming clear.

In a market where the total number of compliance positions is increasing, not surprisingly the number of outstanding vacancies is also rising. The speed at which vacancies are being filled is slowing and many are remaining unfilled for an extended period of time. It is clear that few companies are prepared to compromise on the quality of staff they are looking for and the skills and experience they require.


Whilst candidate registrations have increased, the number of candidates registering for defensive reasons has fallen to only 8%. This is an all time low and very different from the 47% who registered for defensive reasons in 2009. Clearly the perception compliance professionals hold in terms of their job security has dramatically changed. There are, however, competing influences affecting candidate registrations. Companies are focusing on retaining their better staff and whilst the threat of redundancy has subsided, many people still feel cautious and prefer the security of their existing employment. However, for those with the necessary skills, there has probably never been a better time to secure another position in compliance.

SALARIES

The upward pressure on salaries evident in the first half of 2010 has strengthened. Given that salaries are most often simply a function of supply and demand we should not be surprised. The average salary increase achieved by compliance professionals changing employment rose from an average of 8% in 2009, to 16% in the first half of 2010 and up further to an eye-watering 21% in the second half. The rate is back to pre-recessionary levels. Presently, good candidates are receiving multiple offers and companies have even been prepared to buy out bonuses. Whilst not unusual in front office positions, this happens rarely in compliance.


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Market Review – Legal

Legal Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010






Demand began to emerge in the final quarter of 2009 and by the start of 2010 it was clear that a recovery of sorts was underway. “

VACANCIES

The number of new vacancies fell back in the second half of 2010. However, the number was still twice as many as in the comparable period in 2009. Part of this fall was due to the multiple vacancies that some of the British retail banks came to the recruitment market with during the first half of the year. At the time, this changed the dynamics of the market. These instances of multiple vacancies were less prevalent in the second half when investment and wealth management companies and private banks began entering the recruitment market. Given the size of their legal departments they came with single rather than multiple vacancies. In that respect the recruitment market during the second half of the year provided a wider range of opportunities.

The closing number of vacancies rose as a result of both a spike in demand towards the end of the year and the longer than average time that the vacancies were open. This is simply a function of the availability of candidates which declined during the course of the year. For many companies it takes time to revise their expectations to what is now a very different recruitment market to that found at the start of 2010. Not surprisingly many are resisting recruiting lawyers who they do not believe meet their expectations in every way. Protracted recruitment processes will ultimately be the fate of many financial services groups as the recovery continues and candidate shortages become more prevalent.


The number of candidates registering fell significantly during the second half of the year from 379 in the first half to 236. This fall was accompanied by a further fall in defensive registrations where candidates had been made redundant or feared redundancy. Clearly the number of lawyers entering the recruitment market has fallen. They are not only feeling more secure in their current roles, but the prospects with their existing employers have improved. Many institutions are working hard on staff retention and are offering both financial and career development inducements to retain what they consider to be their better lawyers. Unless there is a change for the worse in the broader economic environment, the number of candidate registrations is likely to remain at these lower levels.

SALARIES

The salary increases lawyers achieved when changing employer rose substantially in the second half of 2010 and reflects the increased bargaining power that many now have. In the current market it is not unusual for a lawyer with marketable skills to receive up to three offers. Whilst we are quoting an average of a 13% increase in salary, we are aware of instances where highly sought after lawyers have achieved increases of up to 30%. The salary increases now expected by changing jobs has moved onto a different level and we would expect it to be maintained into 2011.

Given that Barclay Simpson only began to recruit for private practice and in-house commerce lawyers earlier this year, we have restricted this analysis and our commentary to our activities in the financial 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. Demand began to emerge in the final quarter of 2009 and by the start of 2010 it was clear that a recovery of sorts was underway. What has taken us by surprise is that it has been sufficiently strong to substantially absorb the large pool of redundant lawyers that existed at the start of the year. Whilst demand fell back during the second half of 2010 it appeared to be accelerating again by the end of the year. Prospects for 2011, if not as intense as pre-recessionary levels of demand, are sufficient enough to provide for a vibrant recruitment market.


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For whatever motive, and unfortunately we believe it is not always out of genuine want, the financial sector is investing heavily in corporate governance. At an estimated cost of £2.5 billion or almost 5% of total revenues, this investment is not cheap. For those of us working in recruitment, demand has returned to pre Lehman Brothers levels, together with widespread shortages of people with the necessary skills and experience.

With the consultancy sector joining the party and industry and commerce seemingly in the process of following, it is only the public sector where demand is unlikely to recover in the foreseeable future.

However it is clear that the UK and wider world economy is far from being at ease with itself. Whilst worries real and imagined are never far from the surface, there are still economic conflicts that are presently nowhere near being resolved. Ultra loose monetary policy, and printing money is about as extreme as you can get, appears to be a sticking plaster rather than a real solution. The wider economic situation in our view remains delicately balanced. Should economic growth stall for any reason, there is not much left to paddle with.

06 – OUTLOOK

“The wider economic situation in our view remains delicately balanced.

Documents

2011 | Market Reportww1.prweb.com/prfiles/2011/01/25/2926494/BSCorpGov2011.pdf · 06 Outlook Barclay Simpson 2011 Market Report CORPORATE GOVERNANCE London Edinburgh Dubai Hong Kong