The Hidden Costs of Credit Risk IRB Program – Recruitment

One critical aspect of the IRB (Internal Ratings-Based) program that often goes unnoticed in discussions about IRB or IRB repair programs is the recruitment challenge. In this blog, we will explore the costs and challenges associated with recruiting credit risk professionals in the UK and the key questions that organisations should consider when building their teams.  I have written a longer whitepaper about the challenges of recruiting credit risk professionals, and you can download it here. (I won’t cover those challenges in this blog)

The Recruitment Challenge in Credit Risk

IRB and IRB repair is one of the key challenges financial institutions’ faces, and it directly impacts their profitability and sustainability. Therefore, finding and retaining the right talent is crucial for success. However, the recruitment challenge in this field is multifaceted and can be attributed to several factors:

  1. Specialized Skill Set: Credit risk Modelling requires a highly specialised skill set that includes expertise in statistical modeling, data analysis, econometrics and programming skills. Finding individuals with the right combination of skills can be challenging.
  2. Regulatory Complexity: Regulatory standards and requirements in the UK, particularly with regards to IRB, are constantly evolving or lack clarity. It is essential to hire professionals who are not only knowledgeable but also adaptable to these changes.
  3. Methodological Expertise: The methodologies used in credit risk modeling are intricate and can vary from one institution to another. Finding individuals with experience in the specific methodologies that the regulator will approve is key.
  4. Market Demand: The demand for credit risk professionals often outpaces the supply, making it a competitive market. This can drive up compensation expectations and make it even more challenging to attract top talent.

Choosing the Right Recruitment Strategy

To address the recruitment challenge in credit risk management, organisations must carefully consider their recruitment strategy. Here are some key questions to ask:

  1. Permanent Staff vs. Contractors: Should you hire permanent staff or rely on contractors? Permanent staff can provide long-term stability and a deeper understanding of your institution’s operations, but they come with the commitment of benefits and higher overhead costs. On the other hand, contractors offer flexibility but may lack the same level of loyalty.
  2. Consultancies: Utilising consultancy firms can be an option. They often have a pool of experienced professionals who can be deployed on short notice. However, this approach can be costly, and there may be a lack of alignment with your institution’s specific goals and culture.
  3. Location Strategy: Where should your credit risk professionals be based? The location can impact the availability of talent and cost.  The drive to offshore / near shore staff can lead to a lack of understanding of the nuances of the local regulators such as the PRA or EBA. Remote work options can expand your talent pool but may require a robust IT infrastructure and more management.
  4. Mix of Staff: What should the ideal mix of permanent staff, contractors, and consultants be? Balancing this mix can help manage costs and risks effectively.

The Hidden Costs and Risks of Credit Risk Recruitment

While these recruitment choices may address the immediate need for credit risk professionals, they also come with associated costs and risks:

  1. Training Costs: New hires, whether permanent or contract, often require training to familiarising themselves with your institution’s processes and methodologies. This incurs costs and may lead to a temporary decrease in productivity.
  2. Turnover Costs: In a competitive job market, turnover can be a significant issue. The costs associated with recruitment, onboarding, and knowledge transfer when employees leave can add up quickly.
  3. Regulatory Risk: Failing to hire individuals who understand and stay updated on regulatory standards can lead to the failure of the program.
  4. Cultural Fit: Contractors and consultants may not fully align with your institution’s culture and values, which can impact teamwork and overall performance.

IRB Credit Risk Recruitment

IRB credit risk recruitment for your IRB or IRB repair program is not a straightforward task. The hidden costs and risks associated with recruitment choices can impact your institution’s bottom line and regulatory standing. Therefore, it is essential to carefully consider the mix of permanent staff, contractors, and consultants, and the location strategy that best suits your institution’s needs.

Navigating the recruitment challenge in credit risk management requires a strategic approach that balances short-term staffing needs with long-term goals and objectives. By addressing these challenges proactively, financial institutions can build high-performing teams capable of meeting the demands of the ever-changing credit risk landscape in the UK.

Find out about the sectors we recruit in

Click here for our open positions

Bank of England delays final Basel bank capital rules to July 2025