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Interim Market Report 2011 - Corporate Governance Market Reviews

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.


Internal Audit Market Review

Internal Audit
Jun 2009
Dec 2009
Jun 2010
Dec 2010
Jun 2011
New vacancies
29
46
68
73
67
Closing vacancies
17
24
35
38
42
Candidates registering
226
274
296
276
227
Defensive registrations
23%
19%
15%
14%
16%
Overall Salary increase
11%
10%
14%
15%
14%

The internal audit recruitment market is currently experiencing patterns of supply and demand similar to those that existed prior to the recession. Whilst demand recovered strongly in 2010 it was heavily biased towards the financial sector and specifically the banks. One bank having 25 vacancies, whilst potentially flattering the total aggregate number of vacancies, does little for the wider recruitment market. Not withstanding developments in the public sector, the internal audit recruitment market is currently enjoying the broadest level of demand in over three years. The perennial problem of where the skills and experience to meet this demand will come from remains.

Vacancies

At 67, the number of vacancies has fallen back from the level achieved in the second half of 2010 and is below the 68 achieved in the first half of the year. Vacancies are also below the level that was usual prior to the recession. However, whilst the number of vacancies is down, outside of the public sector, the pattern of demand is more evenly spread across the economy. Given the economy is experiencing sub-trend growth it is not surprising that the number of vacancies is below the level that was considered usual prior to the recession. Corporate investment in the UK, which has historically underpinned employment growth in internal auditing, has fallen back from the already low levels of 2010. Given this, it is unlikely in the short term that demand from UK centric internal audit departments will climb further. However, for those multinationals that base their internal audit departments in the UK, which still make up a significant proportion of the aggregate demand for internal auditors from industry and commerce, a weak pound makes the UK a relatively cheap location to base international internal auditors. Whilst we have no evidence to confirm this has been a factor in overall demand, is does provide some reassurance that at least in the short term internal audit jobs are less likely to be lost in the UK.

The number of closing vacancies has risen from 38 to 42. It is indicative of two factors that are at play in the recruitment market. First, companies are being more cautious about their recruitment. The immediate effect of this is that they will only recruit those who closely meet their requirements. Secondly where are the internal auditors to fill the available vacancies? In spite of the subdued state of the economy a chronic shortage of internal auditors has already developed. This leads us to yet again conclude that the shortage of internal auditors in the economy is structural rather than cyclical.

Registrations

At 16% defensive registrations remain low. If registrations from the public sector were excluded then defensive registration would be under 10% and at historic lows. As we have previously reported redundancies were low during the recession and if internal auditors believed they were not going to be made redundant then, it is even less likely they will now.

At 227 the number of candidate registrations has fallen. Many internal auditors who had postponed looking for a position during the recession entered the recruitment market during 2010. The number of registrations is now more reflective of the long term average and may be even more subdued as a consequence of the economic backdrop. For most internal auditors, a move into the recruitment market is a statement of confidence. Given the number of jobs the economy has recently created it is not misplaced. However, nobody can doubt the potential risk of a further economic setback precipitated by the simmering European sovereign debt crisis and other potential catalysts that remain firmly in the media focus. On current trends we do not expect the number of candidate registrations to significantly rise in the later half of 2011.

Salaries

The average salary increase achieved by internal auditors changing jobs fell back to 14%, and remains close to its long term average. Whilst the bargaining power of internal auditors has risen during the last six months, the number of internal auditors securing positions in industry and commerce has risen relative to those securing positions in banking and financial services. Given the more competitive job market for internal auditors in the City, salary increases gained on changing employer in financial services have historically been higher than in commerce.


Risk Management Market Review

Risk Management
Jun 2009
Dec 2009
Jun 2010
Dec 2010
Jun 2011
New vacancies
56
102
140
136
130
Closing vacancies
39
56
85
92
96
Candidates registering
320
331
214
191
175
Defensive registrations
37%
19%
7%
8%
9%
Overall Salary increase
7%
9%
17%
19%
17%


The number of risk managers employed in the financial services industry, having grown substantially during the last 18 months, is starting to plateau. However, the total numbers employed and the overall quality of risk managers is now higher than it was prior to the recession. The risk management profession now enjoys a level of influence in the financial services industry that was not previously there. From a regulatory and management perspective, risk management must not only be seen but also heard. Given this higher profile and at any given time the finite number of risk managers available, it is not surprising that many financial services groups are finding it difficult to recruit risk managers at the standard they desire. Many of the best risk managers are receiving multiple offers, together with ‘buy backs’ from their existing employers. It is also clear how delicately both the economy and financial system is currently balanced. Whilst the total number of people employed in the financial services industry is growing, there are still concerns about growth and falling business volumes. Cost reduction plans still remain very much in place.

Vacancies

The number of vacancies registered in the first half of 2011 has fallen from 136 in the second half of 2010 to 130 in the first half of 2011. The second half of 2010 was probably the high point in demand in the current economic cycle. The initial response to the financial crisis, to invest heavily in risk management and corporate governance has now taken place. If companies were going to establish or expand risk management departments, this has now been completed or is in the process of being completed. However, given the greater number of people now working in risk management, the ongoing demand for risk managers will be higher than prior to the recession.

The number of outstanding vacancies has risen from 92 at the end of 2010 to a post recession high of 96. This reflects both the difficulty that many companies have in securing the services of appropriately experienced risk managers and their determination not to compromise. It is also indicative of the more cautious approach to recruitment that many financial services groups are now taking. It is not unusual for additional interviews to be introduced to the recruitment process and for hiring decisions to be made at a higher level of management.

Given the feeble state of the wider economy, such caution is perhaps a small price to pay for the very real gains made by the risk management profession.

Candidate Registrations

Most candidates are now entering the recruitment market for the more prosaic reasons of career development, rather than the fear of redundancy. Defensive registrations are currently at 9%. Although edging up from a low of 7% last year, this is still a historically low level. These statistics are indicative of the general confidence most risk managers feel about their job security, even though the total number of candidate registrations is falling. The most likely reason for this being that many risk managers took the opportunity to move last year and, whilst not concerned about their personal job security, are still aware of the many continuing risks to the financial system.

Salaries

Salary increases achieved by risk managers has fallen from 19% to 17% and is indicative of the caution that is currently being exercised in the industry. Whilst in treasury risk there have been examples of 50% salary increases, these are very much the exception. In an economy where real earnings are falling and most employees in the financial services industry are receiving salary increases equivalent to inflation, 17% remains a relatively high percentage. Many companies remain determined to secure the services of appropriately experienced risk managers. There are a number who are showing restraint and are more prepared to sell the quality of their opportunity. If the salary differential is not too great, this approach is often successful.


Compliance Market Review

Compliance
Jun 2009
Dec 2009
Jun 2010
Dec 2010
Jun 2011
New vacancies

64

76

151

147

167

Closing vacancies

23

19

64

73

86

Candidates registering

145

148

128

137

156

Defensive registrations

47%

26%

11%

8%

8%

Overall salary increase

8%

6%

16%

21%

22%



Demand for compliance staff now exceeds pre-crisis levels. It is the result of not only increased UK and EU regulation, but also more aggressive regulatory supervision. In response, significant numbers of not only new positions but whole new teams have been 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? It is perhaps a particularly pertinent question when it is clear that the expectations employers have of their potential recruits is rising. Recruitment is taking longer as additional stages are added to the selection process. The increase in demand for compliance staff, rising expectations and the limited pool of expertise, is resulting in higher salaries. The need to employ more compliance staff at higher salaries will make the provision of financial services more expensive and ultimately less competitive. Striking the right balance in an environment when sensitivities to the financial crisis remain high is both a political and regulatory challenge.

Vacancies

The number of new vacancies increased from an already high 147 in the second half of 2011 to 167 in the first half of 2011. Unlike other areas of corporate governance, where a high proportion of the vacancies are simply to replace those who have left, many of the vacancies are newly created.

At the start of the year demand was particularly strong from the asset management and insurance sectors. This demand then spread to include the banking sector with demand building from the investment banks during the course of the second quarter. It includes both London based institutions and those based elsewhere in the UK. Vacancies arose at all levels of experience and seniority from entry level to Head of Compliance.

The number of outstanding vacancies has increased from 73 to 86. This reflects the difficulty many companies are having in securing compliance specialists with the skill sets they require. Given that in the short term there is only a finite number of compliance specialists with the appropriate experience, and given what appears to be more rigorous recruitment processes, an increase in the number of outstanding vacancies is almost inevitable. They are likely to stay high for the remainder of 2011.

Candidate Registrations

Candidate registrations increased from 137 in the second half of 2010 to 156 in the first half of 2011. The number of candidates registering for defensive reasons remains at an historic low of 8%. Compliance professionals are currently enjoying high levels of job security. In spite of the depressed state of the economy, the rise in candidate registrations is indicative of a market where compliance professionals are feeling not only more secure but are sufficiently confident to actively look to improve their employment prospects. This is not surprising given how effective the recruitment industry is at advertising the opportunities available. Looking for a new position, however is not the same as securing one. Companies have become more rather than less selective.

Salaries

The upward pressure on salaries evident during 2010 has continued. Given that salary is most often simply a consequence of supply and demand we should not be surprised. The average salary increase achieved by compliance professionals changing employment has risen from an already high 21% in 2010 to 22% in the first half of 2011. In the present market, good candidates are receiving multiple offers. Counter offers from existing employers have become a regular feature of the recruitment market. Some companies have even been prepared to buy out bonuses. Whilst not unusual in front office positions, this has historically not been a feature of the compliance recruitment market.


Information Security Market Review

Information Security

Jun 2009

Dec 2009

Jun 2010

Dec 2010

Jun 2011

New vacancies

25

35

62

56

53

Closing vacancies

12

15

31

38

32

Candidates registering

280

289

246

211

208

Defensive registrations

53%

36%

19%

17%

17%

Overall Salary increase

4%

6%

12%

11%

13%



The information security market is currently experiencing patterns of supply and demand similar to those that existed prior to the recession. Whilst demand recovered strongly in 2010 it was heavily biased towards retail banking. Demand has broadened out across a wide range of end users and consultancies. The seeming increase in high profile electronic attacks has resulted in ‘cyber security’ becoming a subject not to be ignored and is underpinning demand for information security practitioners.

Whereas in information security most recruitment is now for single hires, there are team building exercises underway in business continuity. Whilst the number of vacancies has fallen back, the pool of redundant information security professionals has dissipated. Information security is now operating effectively at full employment and unlike other areas of corporate governance, information security professionals are able to switch sectors. Increasingly the same candidates are in demand from a range of sectors. The information security market is currently enjoying the broadest level of demand in over three years.

Vacancies

At 53, the number of vacancies has fallen below the levels achieved in 2010. Whilst the number of vacancies is down, the pattern of demand is more evenly spread across the economy. One bank having 15 vacancies, whilst potentially flattering the total aggregate number of vacancies, does little for the wider recruitment market. Given the economy is experiencing sub-trend growth it is not surprising that the number of vacancies has fallen. Further, corporate investment, a substantial element of which is IT related, has recently fallen back from the already low levels of 2010. This investment has historically helped underpin recruitment in information security.

The headcount freezes that were still common in 2010 have largely disappeared. However, information security departments are still regularly under pressure to use external recruitment as a last resort and considerable effort can be required to get roles signed off. It is perhaps indicative of a lack of confidence in the economy rather than the information security work that is currently available.

What is not obvious from the statistics is that demand is currently being driven by mid level managerial roles rather than the more senior recruitment that was prevalent six months ago. Senior managers were in greater demand as a result of the significant amount of restructuring that was then taking place.

Registrations

At 17% defensive registrations have now levelled off at pre-recession levels. It is seemingly a characteristic of the information security recruitment market that defensive registrations are consistently higher than in other areas of corporate governance. This may be indicative of the more capricious nature of the IT industry. Given that the information security market is seemingly operating at full employment, at 208 the number of candidate registrations has remained relatively high. It is clear that a number of information security practitioners having sat out the recession or taken a “make do” position during the recession, are now looking to improve their circumstances.

Salaries

During the first six months of 2011 the average salary increase achieved by information security practitioners moving jobs moved higher from 11% to 13%. In the period few candidates accepted roles from a position of redundancy. As a consequence the bargaining power of information security practitioners has returned and salary increases are now slightly above their long term average. It is not a bad achievement in an economy where real earnings are falling. However, what is not obvious is that with a higher number of candidates moving between sectors, some are being compensated with higher salaries for the loss of benefits such as cars and pensions and in financial services bonus pools.


Legal Market Review

Legal
Jun 2009
Dec 2009
Jun 2010
Dec 2010
Jun 2011
New vacancies

27

49

112

101

74

Closing vacancies

13

21

42

49

43

Candidates registering

453

391

379

236

219

Defensive registrations

57%

28%

12%

10%

11%

Overall Salary increase

0%

4%

9%

13%

14%



Given that Barclay Simpson only began to recruit for private practice and in-house commerce lawyers last year, we have restricted this analysis and our commentary in this section to our activities in the financial services 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. The large pool of out of work lawyers that existed at the start of 2010 has been absorbed back into employment. Now, in July 2011, the number of redundant lawyers is not materially higher than in the period leading up to the financial crisis and recession. However, going forward the pattern of demand that has become established in the first six months of 2011 is more typical of what we can expect for the remainder of the year.

Vacancies

The number of new vacancies fell from 101 in the second half of 2010 to 74 in the first half of 2011. The high number of vacancies generated during 2010 was in reaction to the financial crisis. Many financial services groups and particularly the larger utility banks had recruitment freezes and had not recruited externally for almost two years. When the regulatory response to the financial crisis required substantial legal input, the necessary resources were not available internally. However, a significant pool of legal expertise from unemployed lawyers was available. The result was that many banks came to the recruitment market and were able to fill multiple vacancies. This recruitment is now substantially complete and most banks have legal departments that are fully staffed with talented and adaptable lawyers.

The number of outstanding vacancies has fallen from 49 at the end of 2010 to 43 now. The number is higher than expected and there are two reasons for this. Firstly, the number of lawyers available in the recruitment market has declined making it more difficult for companies to recruit. Secondly, many financial services groups are taking a more cautious approach to their recruitment. It is not unusual for additional interviews to be introduced to the recruitment process and for the authority to recruit to be made at a more senior level of management. As a result, recruitment processes in 2011 are now taking longer than in 2010.

Candidate Registrations

The number of candidates registering fell to stand at 219 in the first six months of 2011. Defensive registrations rose marginally from 13% to 14%. Whilst only a fraction of the percentage during the recession, beyond the usual concerns that are always part of the recruitment market, the increase reflects the potential concerns of some lawyers working in investment banking.

The fall in candidate registrations, whilst relatively modest, indicates that lawyers now perceive prospects with their existing employers to have improved. Many financial services groups are providing incentives to retain their better lawyers. The majority of those now registering are simply doing so for career development reasons and do not have the urgency to move that we had previously seen.

Salaries

The salary increase lawyers achieved when changing employer rose to 15% in the first half of 2011. This is indicative of the shortage of lawyers in the recruitment market. Whilst companies are being more cautious in their recruitment processes, there is no longer an abundance unemployed are no longer pools of redundant lawyers who are prepared to accept positions on the same or, in many instances, lower salaries than they had previously been earning. Lawyers now have greater bargaining power. However, given the wider economic backdrop and the headwinds facing the financial services industry, we do not anticipate the percentage moving above its current level of 15% in the foreseeable future. It most likely represents a highpoint.

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