Risk and compliance functions are more important—and under more pressure—than ever before. To comply with regulatory standards, boost organisational resilience, and create value without taking excessive risks, teams must anticipate and manage an expanding array of challenges in an era of instability. That takes talent across lines of defense, especially in technical roles such as model development, privacy, and cybersecurity.
The costs of talent shortfalls are high, and the headwinds are strong. Since risk is a relatively new discipline in many industries, the pool is of candidates is still small even as demand rises, especially among fintechs and other companies facing closer regulatory oversight. In 2021, the unemployment rate for compliance officers in the U.S. was less than half the national unemployment rate.[1] Top prospects expect more autonomy and flexible work arrangements in addition to better compensation—and they appear to be more willing to switch employers. One financial services firm, for example, saw 25% attrition in the compliance function—double the rate across the company as a whole.
In this tight labour market, nearly every organisation needs a more coordinated, diverse, and inclusive approach to risk and compliance talent assessment, acquisition, development, and retention.
Identifying and closing risk talent gaps
In today’s evolving marketplace, organisations need to update their approaches to identifying, hiring, building, and retaining talent, particularly technical talent. As work and requirements change, such as accelerations in product development cycles and calls for more diversity, so do talent needs. New work may require specific industry knowledge, new functional skills such as evaluating risk in vendor choices and decision-making models, and more efficient teams to meet higher compliance review requirements.
Leadership can gain advantages with a keener understanding of the reasons for attrition in their organisations. More top technical talent wants to be able to switch roles without having to relocate, for example. Many companies with growing risk and compliance teams fail to notice that mid- to late-tenure talent is departing—a potentially worrisome trend when institutional knowledge is being lost. It is an imperative to understand the skills and knowledge needed.
Talent acquisition
With a clear view of the talent it needs, an organisation can determine where to look for it. The most straightforward option may be hiring professionals in similar roles at similar companies or even competitors—which can create a cycle of rising compensation without expanding the total pool of high-quality candidates. Many companies are broadening their searches to find talent in adjacent and even disparate industries. A capital or liquidity risk professional from the financial industry, for example, could bring distinctive insights to a utility. A professional with a background in pharmaceutical marketing compliance could bring fresh expertise, skills, and a risk management mindset for an investment management marketing compliance team. We’re finding that some candidates are looking for a change of pace; around the world, about 48% of the people who left their jobs in the past two years switched industries.[2] (For more on this topic, please see “Addressing the revolving door in risk,” McKinsey Global Institute, Dec. 6, 2022.)
Talent development and mobility
At most large organisations, key talent is likely already on board, hiding in plain sight. Great employees with industry knowledge can be mentored and trained to master the technical and soft skills needed for hard-to-fill risk management roles. Teams already performing a portion of some work, such as contract management, may be able to advance their capabilities to fill other needs, such as managing supply chain risks associated with contracted goods and services from third parties.
Many organisations can build talent more quickly by rethinking training, including apprenticeship and outside learning, in addition to or instead of company-specific training. These investments in individual development can demonstrate the company’s commitment to advancing employees’ careers—a key to reducing attrition. Many employers are finding that employees are more likely to develop new skills as part of their regular responsibilities than in separate learning modules.
Many companies enrich their knowledge and capabilities with talent rotation programs. Even a leader in a long-term business role can benefit greatly from a short-term rotation in risk management. For example, the best person to provide strategic challenges in cybersecurity matters may be someone in a company’s product development team who specialises in security features.
Ongoing talent monitoring
More organisations are shifting from annual talent planning cycles to a more frequent cadence, particularly in this time of volatility. Ongoing monitoring of risk staffing, for example by tracking volume- or activity-based factors correlated with workloads, and quarterly updates to the firm’s talent plan, can help senior leaders make micro-adjustments such as shifting a few recruiters to an uncovered area, redeploying employees from a contracting part of the firm to an area of need, and reallocating funds. Regularly reassessing staffing levels can help companies avoid significant understaffing, which can have major consequences such as overlooking a legal requirement, processing a payment incorrectly, or failing to manage a major build-up in a specific concentration.
Looking ahead
The last three years have underscored the risk organisation’s critical role in getting ahead of a wider array of threats, preventing adverse situations from becoming crises, clarifying budgetary priorities, and driving value-creation. Success is possible only with the right talent in place, and that requires thoughtful talent planning, acquisition, development, and monitoring.
References
[1] Mengqi Sun, “Competition for compliance officers intensifies amid regulatory pressures,” Wall Street Journal, January 19, 2022 (https://www.wsj.com/articles/competition-for-compliance-officers-intensifies-amid-regulatory-pressures-11642623091)
[2] Among respondents around the world who quit their jobs between April 2020 and April 2022, 17 percent did not return to the workforce, 48 percent moved to a different industry, and just 35 percent took a job in the same industry. Almost two-thirds of respondents who left finance and insurance did not return to those industries. Based on a McKinsey survey of 13,382 employees in Australia, Canada, India, Singapore, the UK, and the US from February to April 2022.