More thoughts from Peter Brown

Credit, Risk and Compliance – the boom areas of Financial Services In the hunt for scapegoats for the current malaise one group in the Financial Sector has so far largely escaped censure and arguably had their career prospects enhanced. The rush for profits in recent years by investment banks, private equity and hedge funds in particular has been chiefly blamed for a culture of short-termism that has saddled revenue generators as the main culprits and architects of the current crisis. Those involved in the less fashionable areas of the banking sector – the middle and back office – are now in focus and demand will increase strongly over the next 1-2 years. The current adverse market conditions will inevitably result in a greater focus on Risk and Compliance across ALL financial service entities irrespective of size. Lawmakers will ensure regulations are tighter (to help prevent the causes of the crises in the future) which will mean a greater level of demand for experienced Middle and Back Office personnel in these sectors. Traditionally in the boom times of the economic cycle, revenue generating departments in banks tend to ride roughshod over ‘risk’ areas – the departments are derided as ‘business prevention units’ and are sidelined in the rush for profits from the next product, sector or country that is fashion or vogue for investment.

As recently as last week, the Economist Intelligence Unit (EIU) conducted a survey of 316 Financial Services executives : 70% of respondents felt that the current global credit crisis, which has resulted in over £200 billion of asset write downs, could have been partially mitigated by a heightened profile of effective risk management. Over 59% of respondents now plan to refocus their risk management processes, including employing more people to bolster all risk management departments ranging from Credit to Compliance and Audit The pendulum has undoubtedly swung the other way. Risk management has taken on new importance for stockholders, directors and regulators. Companies will now demand better, more timely analysis of risk, better compliance and a deeper understanding of how the institution is impacted by the dynamic credit / risk environment of a global financial community. Regulators have never had such a mandate to clear up the perceived deficiencies in the Financial markets. Anecdotally, even the worst affected companies of the current crisis are hiring in the Credit, Risk and Compliance sectors despite enforced job cuts in other areas. The priority is clear.