The changing landscape of risk management

Over the past 12 months, we have witnessed the emergence of digitalization across many of the world’s leading commodity trading platforms.

Not only has this trend sparked debate around fundamental analysis versus quantitative analysis, it has also started to shift the expectation of risk management, and redefine the functionality of the risk group.

Across key trading hubs in New York, Houston, London, Geneva and Singapore, Chief Risk Officers are gravitating towards hiring risk professionals that have hybrid skill-sets that incorporate both quantitative and market risk experience.

Traditionally, there has been a clear divide between a risk analyst who is responsible for producing daily reports and providing risk analytics and a strong quantitative analyst, who is commercially minded and able to use programming skills (using Python, R or Matlab) to add commercial value whilst mitigating risk.

We have seen this divide begin to erode as some of the more traditional risk reporting tasks have blended into the middle office and control functions whilst programming and in-depth data analytics are making up a larger portion of the risk function.

As we move towards 2020, we have witnessed a variety of trends across different regions in risk management. For instance in North America, some of the larger trading organizations have repositioned part of their traditional market risk reporting function into the middle office/controls function.

We have seen a number of trading businesses have undertaken critical analysis of their current operating platforms, ERP systems, and general business mechanics, to drive process improvement and mitigate risk.

Interestingly, there has been a trend against hiring traditional enterprise risk professionals. Organizations have opted to bring in Business Process Improvement consultants who have the ability to identify risk, drive process improvement and bring down operating costs by creating synergies across the business.

There has also been a trend towards hiring risk professionals that are able to use programming skills and coding languages, such as R and Python, at the Analyst and Senior Analyst level. This has particularly been the case across the UK where individuals with 3-7 years’ experience that possess strong quantitative skills have changed the dynamics of the market, demanding and achieving significant salary increases.

Historically, there has been fluidity exhibited between the UK and continental Europe, with candidates moving between the two regions. Following uncertainties surrounding Brexit, EU nationals that currently reside and work in the UK are choosing to remain in there roles until there has been some type of resolution.

Across Western Europe, organizations have generally shown more flexibility particularly surrounding individual’s commodity product knowledge. Furthermore, have done an outstanding retaining talent within their risk functions with many teams boasting well tenured members. Hiring risk professionals into non-traditional commodity trading hubs across Western Europe has continued to be a challenge for some businesses as they look to grow out their global risk and trading platforms.

In Singapore, organizations continue to rotate their senior talent between regions, resulting in expatriates running functions like Finance and Risk in the Asia Pacific Region. The trade war between the US and China has also seen organizations look to diversify their country risk, given the uncertainty surrounding China. Currently, we are also seeing rapidly growing economies such as Bangladesh, Myanmar, Vietnam, and Laos opening themselves up to international trade.

Despite the demand of quality risk professionals that have strong quantitative skills becoming more prominent globally, there has been a shortage of individuals in Singapore who are able to balance risk analytics and quantitative methods. As trading merchants in Singapore are making more of an effort to hire more local professionals, competition for these individuals is intense and thus salaries have been inflated across all levels.