In 2006, when Craig Termotto joined Michael Page International, the London-based worldwide financial services recruiting firm, he was half of a two-person team based in Stamford, Connecticut, that specialized in financial risk management. Today, as head of financial risk recruiting for that office, he heads an eight-member squad that scrambles to keep up with burgeoning demand. And that’s just in Connecticut. The firm also has seven risk recruiters in New York City and five in Boston. “Recruitment has probably tripled or quadrupled” in the past two years, says Termotto, 37, a former institutional equity trader for several brokerage firms, including UBS and ING.
“Last year was a record year for us,” notes Michael Woodrow, president of executive search firm Risk Talent Associates in New York. “It is a good time for risk managers.”
Once regarded as a sideline job in the high-octane world of trading and portfolio management, risk management has emerged as a high-paying, sought-after specialty at hedge funds, banks and other financial firms. Hiring is on the rise, pay is up, and financial risk management training programs are booming.
Hedge funds, which increasingly want to land institutional investors, are finding that endowments and pension funds demand high levels of risk management — a trend accelerated by the recent market turbulence. The push for more-sophisticated risk management has resulted in a flood of business for recruiters.
“A lot of it has come down to what outside investors want to see,” Termotto says.
The Global Association of Risk Professionals, founded in 1996, counts 76,000 members worldwide. When it started issuing a financial risk manager certificate in 1997, 108 candidates sat for the exam. Last year 6,740 took it. As of May, the number of registrants for the 2008 test, which will be held in November, was already at 9,020.
“I think the current financial market is helping us,” says Chris Donohue, head of GARP’s Research Center. “It has put risk management in the headlines. More people are looking for training and education.”
One of the attractions of the profession is the rising level of compensation. In its annual survey of pay for risk professionals in the capital markets, released in April, Risk Talent Associates found that average compensation increased 7 percent in 2007 over 2006. The key driver: cash bonuses, which were up 11 percent last year.
Alpha magazine conducts its own compensation survey for the hedge fund industry, and the figures for 2007 found that mean total compensation for chief risk officers at hedge funds was $1.59 million in 2007, up from $1.40 million in 2006. That was the highest pay level for noninvestment professionals at hedge funds and on par with what senior traders made. Lower-level risk managers earned an average of $760,000 in 2007, up from $575,000 in 2006.
Those salary levels would have been unimaginable 15 to 20 years ago. Financial risk managers in those early days were considered low-level functionaries who couldn’t cut it in the fast-paced world of trading, and their pay reflected their status.
“The original risk manager 20 years ago was a guy in a short-sleeve shirt who bought insurance,” says Risk Talent’s Woodrow. “It certainly has matured over the years.”
Nowadays it is not unusual for a chief risk officer to have a Ph.D. in finance. Philippe Jorion, a finance professor at the University of California, Irvine, says that students in his advanced financial engineering course increasingly are interested in becoming risk managers. “The area has blossomed over the past five to ten years,” he adds.
Termotto says firms recruiting risk mangers now frequently seek candidates with advanced degrees from top-notch universities, and they give preference to those with strong backgrounds in math who can run today’s complex risk analysis programs.
“In the old days you took a trader who didn’t want to trade anymore and put him in risk, even if he really didn’t understand risk,” he says. “Today, risk people sometimes rank higher than traders.”
