Risk Professionals Will Continue to Thrive in Risky Markets

If you're a risk professional, you're in luck. According to the fourth annual Professional Compensation Survey by risk management executive search firm Risk Talent Associates (RTA), today's risk professionals are taking home heftier paychecks. The study looked primarily at risk pros in the capital markets space and found that average total compensation increased by 7 percent in 2007 over 2006, with an 8 percent compound average growth rate (CAGR) since 2003. The survey notes that compensation for managers specializing in market risk or credit risk is almost equal, and only slightly less than compensation for those focused on enterprise risk.The RTA says the main driver for the pay hikes tend to be increased bonuses, with 11 percent growth in cash bonuses and 6 percent growth in noncash bonuses for 2007 over 2006. New risk managers showed the highest growth rates in total compensation (professionals with less than six years of experience) and less senior titles (Analyst, Associate, Senior Associate and Manager).

So despite all the turmoil in today's credit markets, risk managers are being held in high regard by firms. Michael Woodrow, president of RTA, said in a statement, "It does not appear that risk managers took the fall for issues in the markets and related losses at large companies. Firms recognize that a strong risk management team will sound the warning. Many of the firms hit hard by the sub-prime fallout could have averted major issues had the most senior business managers followed the advice of the risk managers."

I recently spoke with David Rogers, global product marketing manager for risk with SAS, for an article I wrote for the June issue in risk tech spending among banks. He, too, believes that risk professionals will be in high demand going forward. Banks continue to embed risk into their cultures, he said, partly because of initiatives surrounding their Basel preparedness efforts. "Banks are also building in an education element to help staff understand their roles in organizational risk. They're showing staff that certain actions have an impact on the bottom line."

But even beyond this, Rogers says the universities are getting in on the risk education act. "Colleges are bringing risk into their curriculum as a specific topic," he says, adding that SAS software is being used in a number of universities for courses that deal with risk, such as North-West University and North Carolina State University. "If you have this education, you'll be in demand. Salaries are very high," says Rogers.

He does, however, say that one doesn't necessarily have to be strictly a risk professional. Rather, financial institutions and others will seek well-rounded individuals with enough business savvy so that when they are dropped onto a business unit, they can better understand the business aspects of a given situation.

David Howard-Jones, a partner with Oliver Wyman who was interviewed for the same story as SAS' Rogers, says that banks will look to spend more money on improving their risk management talent pool. "Partly because of Basel, risk management teams have gotten bigger. Now is the time to consolidate those teams and become more expert," he says.

In light of these developments, perhaps there is a silver lining to the credit crisis and the risk managers can redeem themselves and their profession.