Corporate Governance Recruitment Market Report 2016 Internal Audit

Transcription

1 Corporate Governance Recruitment Market Report 2016 Internal Audit

2 BARCLAY SIMPSON MARKET REPORT 2016 INTERNAL AUDIT CONTENTS Welcome to Barclay Simpson s 2016 Internal Audit Market Report Barclay Simpson has been producing corporate governance market reports since This year we are producing two reports. This one, summarizing and analysing recruitment trends in the internal audit recruitment market, includes an employer survey. Later in the year we produce our compensation and market trends report, which will focus primarily on remuneration and will include a survey of internal audit professionals registered with Barclay Simpson. Comparable reports exist for all other areas of corporate governance. They can be accessed in section 7 of this report ( About Barclay Simpson ) or at We place great value on the professional reaction to our reports and would appreciate your comments and any further requests for clarification or information. 01/ Executive Summary /1 02/ market analysis /2 03/ market commentary /3 04/ sector analysis /4 05/ salary GUIDE /9 06/ Employer survey /12 07/ About Barclay Simpson /24 Offices London New York Dubai Hong Kong Singapore Disciplines Internal Audit Risk Compliance Security & Resilience Legal Treasury

3 01 EXECUTIVE SUMMARY Stability lifts demand for internal auditors The internal audit recruitment market does not operate in a vacuum but remains substantially dependent on the economic environment within which it operates. Given this, there is much to be positive about. The UK economy presently employs 500,000 more people than it did a year ago and whilst the growth in the number of people employed in internal auditing has slowed, it has no doubt still made a contribution to that increase. Unemployment is now at a 10 year low and at levels last achieved before the financial crisis. Productivity and business investment are also finally increasing as the scarcity of workers focuses companies on utilising them more efficiently. Whilst clearly a hostage to fortune, conditions in the internal audit recruitment market are currently benign. In terms of the number of vacancies generated, having fallen back in the first half of 2015 from the multi-year highs of 2014, the demand for internal auditors marginally increased in the second half of the year. A slowdown after the surge in 2014 was always likely and the run up to the general election provided the uncertainty that invariably slows the recruitment market. Buoyant commercial sector We have previously reported the dominance of the financial sector within the internal audit recruitment market and the numbers of internal auditors employed in financial services remains vastly higher than in other sectors. Whilst the 2.5 billion of regulatory fines imposed on the financial services industry in the last two years makes the cost of internal audit and other corporate governance functions look cheap, the increase in demand for internal auditors in the second half of 2015 was substantially driven by the commercial sector. Standards continue to rise Many Heads of Audit believe they do not have the resources necessary to meet the demands made on their departments. In our survey, only 47% believed their department was adequately staffed, down from 53% in The challenge for many Heads of Audit is not always simply to fill vacancies with like for like replacements. A contributory explanation for the ongoing rise in the average salaries paid to internal auditors (as is happening in other areas of corporate governance) is that the demands made on internal auditors and the skills and abilities they require, continues to rise. Internal audit departments are often paying higher salaries because they are recruiting internal auditors with better innate abilities and experience or those who have specialist, in demand skills. Outlook for 2016 looking positive The outlook for the internal audit recruitment market in 2016, subject to all the usual caveats, is that demonstrably competent internal auditors entering the recruitment market with realistic expectations should not be disappointed. Many Heads of Audit believe they do not have the resources necessary to meet the demands made on their departments. In our survey only 47% believed their department was adequately staffed. Q - Do you feel your department is sufficiently resourced for the demands that are made on it? 1

4 02 MARKET ANALYSIS VACANCIES Vacancy generation rises The number of vacancies generated in internal auditing recovered in the second half of We noted in our last report that the internal audit recruitment market, having played catch up in response to the Euro crisis during 2014, was experiencing more natural levels of activity in It appears that the general election had a dampening effect on recruitment activity in the first half of 2015 and, according to our survey, when compared to a comparable period in 2014, the number of internal audit departments reporting they had recruited or attempted to recruit in the previous six months, had declined from 77% to 71%. Banking and the consultancy sector were the standout sectors with almost universal demand, whereas the public and not for profit sectors were comparatively depressed. Looking forward, when asked about their recruitment plans for 2016, Heads of Audit anticipate their plans will be little different from Only 15% reported they were unlikely to recruit in It demonstrates confidence that either they will be allowed to expand their departments or more likely to fill internal audit vacancies as they almost inevitably arise. We would be surprised if it was otherwise. u New vacancies u Outstanding vacancies Rate of placements Counter offers common in commerce To provide a better insight into the dynamics of the recruitment market, this graph plots the rate at which placements have been made across the last four years. It reflects the rate at which candidates are accepting offers of employment. The recovery in the rate of placements stalled during the second half of Whilst the response to our survey was broadly consistent with 2014 when 73% of Heads of Audit reported they had found it difficult to recruit against 71% in clearly salary expectations are rising. 26% of respondents reported that candidate salary expectations were excessive and beyond their budget. This problem is compounded by counter offers internal auditors receive from their existing employers keen to retain their services. This is currently particularly prevalent in the commercial sector. Not unreasonably, companies often look to retain existing staff rather than face the challenge of replacing them. Whilst such an environment emboldens salary expectations, counter offers are not usually simply about money but also career development and a fresh challenge. It is frustrating for companies who are recruiting when, perhaps even after a start date has been agreed, the prospective recruit decides to stay with their existing employer. u Placement rate 2

5 03 MARKET COMMENTARY Demand for internal auditors rising The results of our survey, combined with our own experience, confirm a buoyant and confident recruitment market where redundancies are rare. There are, however, likely to be adverse developments for internal auditors employed in the energy and resource sectors as investment and jobs continue to be cut. Frothy asset valuations have also encouraged mergers and acquisitions between companies operating in other areas of the economy. These have been at their highest level since 2007 and not unreasonably result in uncertainty for the internal auditors concerned. Some internal auditors struggle However, employers are currently looking to recruit in an environment where there is a chronic shortage of internal auditors with both in-demand skills and the required experience of relevant industries, products and regulations. Those with in-demand skills and abilities are often able to attract multiple offers. Unfortunately, even experienced internal auditors who do not have them, can find themselves with few options. For example, whilst qualifications and years of experience are quantitative measures, qualitative and subjective measures such as commercial savvy and credibility with the business, are often more important and something even experienced internal auditors can lack. This leads to some internal auditors struggling in what they believe is a buoyant recruitment market. Departments routinely benchmarked Given this, some otherwise experienced internal auditors may look to take junior, less well remunerated positions. This does not usually happen. As internal audit departments are routinely benchmarked and less effective ones exposed, the standard required by internal auditors to attract offers is becoming uniformly high. Our surveys consistently report that Heads of Audit consider both technical and interpersonal skills vital and are rarely prepared to compromise. Managing expectations In a buoyant recruitment market expectation management can become a significant part of a recruitment consultant s role. This includes not only reining in candidate salary expectations, but also outlining what companies can realistically expect from the recruitment market given the salary and opportunity they are offering. For companies not prepared to take advice and respond to the realities of the recruitment market, their search to recruit can become a long and frustrating process. To best attract potential recruits, we recommend that companies partner with a smaller pool of agencies which avoids the recruitment market becoming flooded with their vacancies. This also ensures their message is more tightly controlled. High quality job descriptions and supporting documentation are helpful. Brand reputation is important and receiving poor documentation and seeing unfilled vacancies sitting with multiple agencies for an extended period of time gives the wrong impression to prospective applicants. Efficient recruitment processes vital Once clients have received a candidate s CV, it is imperative that the selection process is well thought through, efficient and results in a timely outcome. When making an offer, the salary does not have to be the highest, but it does need to be competitive. Making an unrealistically low initial offer which a candidate will simply reject will most likely prejudice subsequent negotiations. Unfortunately, many companies still have long and disjointed recruitment processes. If an internal auditor receives a swift offer from a potential employer, they may well discount a company whose recruitment process is taking much longer. Whilst a company may ultimately have a better potential employment proposition, they can be beaten in the recruitment market by those who are prepared to operate efficient and effective recruitment processes. An expanding potential market It is encouraging that the breadth of the potential internal audit recruitment market is developing. Within the financial services industry the 3 lines of defence model is expanding the potential market place and opening up opportunities for internal auditors. Up until recently the movement of people between the various disciplines that make up corporate governance was limited. It is now however steadily improving. Potential candidate numbers are being positively influenced by the movement of people between audit, compliance, risk and information security. This is not only expanding the market place but increasing the career development opportunities for people working in corporate governance more generally. 3

6 04 Sector Analysis BANKING AND FINANCIAL SERVICES Banking Demand in banking was strong throughout 2015 with 95% of banks reporting they have recruited in the last 6 months. In many instances this will have been for multiple vacancies. The rate at which vacancies are being generated has remained broadly consistent for the last two years. Demand is at Associate, AVP and VP levels, with a notable increase in demand for senior Head of Audit roles towards the end of the There is, however, an increasing tendency to fill senior vacancies through internal promotion and then to backfill the resulting less senior vacancies. Candidate shortages are widespread and some banks are becoming more flexible by opening up vacancies to junior, part-time workers and candidates from the EU. We have seen mid and senior level banking audit recruitment into the Big 4 and other consultancies. They have been offering sufficiently high salaries to outbid top banks as they aggressively expand their risk and internal audit outsourcing and co-sourcing capabilities. Within capital markets and investment banking there is notable demand for traded credit risk, market risk, quant / model validation, treasury and liquidity experience. Also, within retail and investment banking there is significant demand for conduct risk and financial crime auditors. It is becoming increasingly common to see movement from other areas of corporate governance into internal audit and vice versa. Within internal audit there is demand for candidates 4 from both compliance and financial crime as well as retail and wholesale credit risk. In many cases, practitioners with good technical knowledge will be considered, without specific audit experience. Whilst not yet common, there have been an increasing number of instances where Heads of Audit of midsized banks and asset managers have moved to become Heads of Compliance. For a bank to successfully recruit, offers need to be competitive, and as our compensation survey revealed six months ago, increases of 20% are commonplace. Bonus buyouts tend to be on a case by case basis and are more prevalent at VP and upward levels. Going forward, regulation will continue to drive demand. Some banks are simply under pressure to increase the scale of their internal audit departments whilst others are building teams in compliance / conduct risk and financial crime. New regulations relating to benchmarking come into force in April 2016 and it is likely that banks, as some already have, will need to respond by recruiting benchmark auditors. A source of leakage from internal audit departments is the establishment of first lines of defence roles. Although not widespread, this is resulting in additional internal audit vacancies. Asset & Wealth Management There is significant and growing demand for internal auditors from this sector. This is substantially regulatory driven, as UK, European and even global legislation comes into effect. The number and calibre of internal auditors employed in the sector is steadily rising. There is demand for experience in front office trading, portfolio allocation and for those with strong regulatory knowledge in areas like CASS. Regulation will continue to drive demand. Some banks are simply under pressure to increase the scale of their internal audit departments whilst others are building teams in compliance / conduct risk and financial crime. Given the shortage of candidates with this experience, many companies may need to reconsider the level at which they can realistically recruit. Sell side auditors have been moving to the buy side and auditors with custodian or back office asset management related audit experience have been moving into front office audit focused roles. Consultancies are notably active in the sector. Many well-known but relatively niche private banks, wealth and asset managers use consultancies to provide

7 all or some of their internal audit capability. This has resulted in significant demand. Whilst the consultancies may previously have struggled to recruit, they now have a better proposition to put to potential recruits as a result of their increased range of clients. Many have dropped the need for specific educational and professional qualifications in favour of competencies and skills in their advisory business lines. Demand is now stronger as smaller companies in the sector have reached a critical size and have brought their capability in-house or expanded from possibly a standalone Head of Audit. Salary increases in the sector achieved by moving are generally lower than in banking. The average increase is 15% against the 20% average achieved within the banking sector. However, auditors in the sector are often more sensitive to factors such as culture and work life balance. Bonus buyouts are also more common, which may go some way to explaining why some of the base salaries offered are not as attractive. Presently there is every indication that demand from the sector will remain strong in As in banking, we expect this demand to extend to internal auditors with broader financial services audit experience who have the potential to develop. Insurance In response to our survey, 55% of Heads of Audit in the insurance sector believe their department is sufficiently resourced. Whilst this is a similar percentage to 2014, it is, for example, significantly below the percentage reported in Asset Management. At 74%, the number reporting that they had looked to recruit in the last six months, was down from 93% in This seems to indicate a slight softening of demand and, during the course of 2015, demand appeared to shift from smaller to bigger companies in the sector. A big influence on the insurance sector has been the scale of takeover and merger activity. For some of the companies involved recruitment has simply been suspended whilst internal audit teams are being integrated. However this can lead to defensive registrations for internal working in these departments which can be positive for companies searching for sector specific skills. For others it creates new opportunities as departments are restructured or developed under a new leadership team. However, London insurers struggled to recruit in 2015, with 79% of Heads of Audit reporting it was difficult. This is perhaps not helped when insurance company internal audit departments consistently require their internal audit recruits to have prior sector experience. At senior auditor level this can be problematic and it is not uncommon for such vacancies to remain open for several months. An increased complication is that, as the banks have become more open in their recruitment strategies, the insurance sector is prey to losing senior auditors. This is not helped by the flat structure that many insurance internal audit departments employ which leaves them open to competition from some of the more structured and progressive departments in the banking sector. Outside of the larger internal audit departments in the sector, many vacancies are generalist. Candidates with in-demand generic skill sets will frequently attract multiple offers and, when roles and companies are not dissimilar, salary will often be the deciding factor. Candidates with indemand generic skill sets will frequently attract multiple offers and, when roles and companies are not dissimilar, salary will often be the deciding factor. 5

8 COMMERCE As previously reported, commercial companies were more active in the recruitment market during the second half of 2015: 60% of FTSE100 companies reported they had recruited in the last six months, against 52% of non FTSE100 companies. However, according to our survey, despite commercial companies clearly believing their internal audit departments are under-resourced, budgets in the sector lag behind those in financial services. Outside of the energy and resource sectors, companies across other sectors of the economy are recruiting. Demand is particularly strong in the technology and telecoms sectors. Vacancies, as ever, are primarily at senior / lead auditor level for internal auditors with 1-3 years PQE and are spread across the UK. Companies are under pressure from the financial services sector to offer competitive salaries and many struggle to compete. As a consequence companies are generally prepared to consider internal auditors with experience gained in other sectors. They will usually focus on good audit skills and experience over specific product or sector experience. There has been an increase in roles requiring significant (over 50%) travel and for internal auditors with language skills. Companies need to offer premium salaries to attract these candidates. More recently, roles that are being promoted as delivery based audit manager roles are being seen as simply audit senior / lead auditor roles. Candidates are declining these in favour of genuine supervisory / management roles. Internal auditors from the EU continue to be popular and help with candidate availability. 6 PUBLIC / Not-for-profit sectors There is little evidence that recruitment budgets are increasing in either sector. Within the public sector, it still cannot be assumed that a vacancy will be filled externally. Both sectors remain at risk of losing staff to internal audit providers, particularly those auditors who are qualified or approaching qualification. However, there is one department in the public sector that is likely to influence demand the Government Internal Audit Agency. The Agency provides internal audit services to the 12 largest central government departments and also provides assurance services to the European Commission, providing both the UK Government and the European Commission with advice and assurance on the implementation of the European Regional Development Fund (ERDF) programmes. As the Agency continues to integrate audit teams from different departments and recruit specialist auditors, it can expect to employ up to 600 internal auditors. If, as expected, recruitment starts to pick up in 2016, a more buoyant public sector recruitment market should emerge. Whilst budgets might not have increased, a positive is the upturn in vacancies in the NFP. Vacancies are broadly based from auditor to a surprising number of Head of Audit roles. These vacancies have had a positive effect on the internal audit recruitment market given that they frequently offer flexibility, an attractive work / life balance and often the reduced hours that many internal auditors seek. In light of the recent absence of this type of vacancy from the recruitment market, these vacancies are attracting significant responses. Demand is particularly strong in the technology and telecoms sectors. Vacancies, as ever, are primarily at senior / lead auditor level. regional focus Financial services continues to drive demand across the regions. However, regionally based financial services groups now frequently require the same level of expertise as those in London. Given the number of internal auditors who are prepared to relocate to the South East and London to secure higher paying positions, the regionally based internal audit departments of many financial services groups are left with fewer candidate options. Given the demand for specialist skills generalist auditors risk becoming marginalised. Salaries at Senior Manager and Head of Audit levels outside of London have increased in the past 12 months whilst salaries at Group / Lead Auditor level are still playing catch up. Consultancies are also clearly doing more to retain staff which is further reducing the potential flow of candidates into in-house positions.

9 IT AUDIT According to our survey, more IT audit departments report they are insufficiently resourced and are more likely to have recruited in the last 12 months. The demand for IT auditors is also becoming more specialist, with only 30% of vacancies being for what could be described as generalist roles. As might be expected, the banking sector in London is leading demand from Associate to MD level. Particular areas of focus are cyber security and emerging threats (which includes digital / mobile risk), data analytics / data assurance specialists and disaster recovery. Whilst subject matter experts without audit experience are often considered for these roles, most offers go to candidates who have a combination of audit and technical experience. Data analysts work in tandem with audit departments, either engaged on reviews or analysing their work.banks are also recruiting IT auditors to focus on back office functions / operations and, within this, the greatest demand has been for those with experience of reviewing risk and compliance departments. Change / Project Assurance professionals are still in demand, although given their relatively low numbers within internal departments, there is a still a strong reliance on the Big 4 to complete this work. Asset Management has seen significant demand for IT auditors, whereas demand has been more subdued within the insurance sector. Other financial services groups face the same problems with regard to salaries and career opportunities when competing with larger banking groups. The non-london IT audit financial services recruitment market has continued to experience strong demand. Demand for IT auditors from commerce has been more subdued. Many of these companies do not have the regulatory pressures that those in financial services experience. Demand is more generalist. Co-source arrangements are more common and manager grade staff frequently manage a co-source relationship rather than a dedicated inhouse team. Q - Do you feel your department is sufficiently resourced for the demands that are made on it IT Audit? The feedback from many banks is that their preference for Big 4 IT auditors only extends to AVP roles and below. At VP level and above, it is felt the Big 4 general controls approach is not sufficiently technical to conduct effective application control / integrated audits. Where staying in a Big 4 environment up to Manager or Senior Manager level previously enhanced CVs, this is no longer the case in banking. Cross sector mobility is becoming increasingly common in IT auditing. Those moving between sectors tend to have strong infrastructure, networks, operating system, database and cyber understanding. In 2016, we anticipate that cyber security and data will continue to be a key focus across all sectors. consultancies There is currently comprehensive demand from the consultancy sector. In fact, all respondents to our survey reported that they had recruited or attempted to recruit in the previous six months. There is still strong demand from the Big 4 who now complete much of their recruitment directly and partially overcome the challenge by using their international footprint and secondments to bring overseas staff to fill vacancies in their UK teams (this is particularly the case in IT Audit where many Tier 2 migrants work). They are also using retention strategies which include accelerated promotions, highly competitive salaries, (often above the in-house market rates) and the opportunity to benefit from secondments. Furthermore, when there are regulatory changes the Big 4 tend to be at the forefront of the training and development. Staff can be reluctant to leave, given the opportunities to broaden their skill sets and the access to high levels of training and support. Notwithstanding this, the Big 4 have a strong presence in the recruitment market and robustly compete for internal and computer auditors with highly marketable specialist skills. Mid-tier consultancies are currently engaged in comprehensive recruitment campaigns. They are constantly at risk of losing staff such as upcoming public sector auditors who can be attractive recruits in the in-house private sector. Whilst there is some movement between consultancies, most struggle to recruit given the level of competition for staff. 7

10 THE CONTRACT MARKET In response to our survey, 28% of internal audit departments reported that they either significantly or routinely use external resources and only 20% reported limited or no use. Overall, the contract recruitment market remained buoyant in the second half of Demand was broadly based, driven by the usual need to bolster departments during busy periods, permanent headcount leaving, regulatory project based work and also to buy-in expertise to carry out specific reviews rather than use more expensive consultancies. Demand is currently weighed towards banking and financial services and, within that, towards investment and corporate banking. What is positive is that there are now more options open to contractors. Rates have remained consistent, although premiums are available for contractors with hard to source skills. Contracts are being extended, which is positive for the market. We have continued to see demand for contractors to help with regulatory project based assignments, such as to manage benchmarking reviews and to bolster benchmark remediation project teams. Increased regulation and oversight from the regulator, most notably within banking and other financial services, is creating increased demand in these areas. This looks set to continue into Recently, there has been increased demand from outsourcers looking to recruit contractors to manage new projects / clients. This is possibly the result of more companies looking to outsource services to streamline processes and systems. There is also an increased privatisation of public services by the government. Demand is also being generated by permanent roles taking longer to fill or extended notice periods slowing the arrival of incoming recruits. Contractors are helping ensure audit plans stay on track. Q - To what extent do you rely on external resources to achieve your audit plan? Contracting is a growth area and non-specialist agencies are now more likely to operate in the internal audit recruitment market. Careful consideration should be given before registering with non-specialist agencies. In the last year there has been a tightening of the regulation, law and enforcement surrounding IR35 and tax regime changes are planned for early 2016 that will impact contractors. For those internal auditors looking to contract it is important that appropriate advice and consultation is sought. In the last year there has been a tightening of the regulation and enforcement surrounding IR35 and tax regime changes are planned for early it is important that appropriate advice and consultation is sought. 8

11 05 SALARY GUIDE We reported in our main Salary Guide and Compensation Survey six months ago that the average salary increase achieved by internal auditors changing jobs was 15%. This was a surprisingly small decrease on However, those staying with their existing employers achieved 5.5%, up from 4% the previous year. The increase was no doubt reflective of developments in the wider economy and the importance internal audit departments are placing on the need to retain their existing staff. Overall, the results of our latest employer survey suggests that salary pressure has intensified. 26% of internal audit departments report their perception of candidate salary expectations are excessive and beyond their budget, up from 24% in This pressure appears to be more keenly felt in commerce where budgets are perhaps tighter. A major factor driving salary increases is that companies are often looking to upskill when they look to replace leavers. This can have the effect of making it appear that salaries are rising faster than they are. Companies are paying more because they are recruiting internal auditors with higher skill sets. Many companies are prepared to accept that recruiting high quality internal auditors will be expensive. Given this, they still expect value for money. In our experience, if they are prepared to compromise on the suite of experience and abilities they are seeking, they are unlikely to pay for the privilege. The internal auditor concerned may simply be pleased to receive an offer. Salary guidance Barclay Simpson analyses the salary data that accumulates from the placements we make in the UK. This provides a guide to salaries for internal audit professionals. The salary ranges quoted are for good rather than exceptional individuals and take no account of other benefits in addition to salary that usually accrue to internal auditors, such as bonuses, profit sharing arrangements and pension benefits. Barclay Simpson will release a Compensation and Market Trends Report in July that will include detailed information on salaries. BIG 4 London IT Audit London Regional IT Audit Regional Associate (1-3 yrs exp) 30 42, , , ,500 Senior Associate (3-5 yrs exp) 42 52, , , ,500 Manager (5-7 yrs exp) 55 65, , , ,000 Experienced Manager (7-10yrs exp) 65 80, , , ,000 Senior Manager (8-12 yrs exp) , , , ,000 Director (12 yrs exp) 100, , , ,000+ 9

12 MID-TIER London IT Audit London Regional IT Audit Regional Consultant (1-3 yrs exp) 28 40, , , ,000 Senior Consultant (3-5 yrs exp) 40 48, , , ,000 Manager (5-7 yrs exp) 50 60, , , ,000 Experienced Manager (7-10 yrs exp) 54 65, , , ,000 Senior Manager (8-12 yrs exp) 65 85, , , ,000 Director (12 yrs exp) 85, , , ,000+ COMMERCIAL LONDON IT Audit London Regional IT Audit Regional Auditor (1-3 yrs exp) 32 48, , , ,000 Senior Auditor (3-5 yrs exp) 45 60, , , ,000 Lead Internal Auditor / Assistant Manager (5-7 yrs exp) 52 68, , , ,000 Experienced Manager (7-10 yrs exp) 65 80, , , ,000 Senior Manager (8-12 yrs exp) 75 95, , , ,000 Divisional Head of Audit (12 yrs exp) 100, , ,000 85,000+ Group Head of Audit / Director 125, , BANKING - IT AUDIT AND REGIONAL IT Audit London REGIONAL IT Audit Regional Auditor (2-4 yrs exp) 40 55, , ,000 Senior Auditor (3-6 yrs exp) 50 70, , ,000 Lead Internal Auditor / Assistant Manager (5-7 yrs exp) 65 85, , ,000 Experienced Manager (7-10 yrs exp) , , ,000 Senior Manager (8-12 yrs exp) , , ,000 Director (12 yrs exp) 115, , ,000+ INVESTMENT BANKING LONDON Analyst 40 55,000 Associate 50 80,000 Assistant Vice President 65 85,000 Vice President ,000 Director / Senior Vice President ,000 Executive Director ,000 Managing Director 150,

13 RETAIL BANKING LONDON Auditor 35 45,000 Senior Auditor 45 60,000 Audit Manager 60 75,000 Senior Audit Manager ,000 Head of Audit ,000 Director 130,000+ ASSET MANAGEMENT LONDON Senior Auditor 45 65,000 Audit Manager 65 90,000 Director ,000 Managing Director / Head of Audit ,000 INSURANCE - LLOYDS MARKET LONDON Senior Auditor 50 65,000 Audit Manager 65 90,000 Managing Director / Head of Audit ,000 SMALL INSURANCE - LIFE AND NON-LIFE LONDON REGIONAL Senior Auditor 50 60, ,000 Audit Manager 60 75, ,000 Senior Manager 80 95, ,000 Head of Audit , ,000 LARGE INSURANCE - LIFE AND NON-LIFE LONDON REGIONAL Senior Auditor 50 65, ,000 Audit Manager 60 85, ,000 Senior Manager , ,000 Head of Audit 145, ,

14 06 Employer SURVEY 2016 INTERNAL AUDIT As we did in 2015, this year we have included the results of our recently completed employer survey in this, our 2016 Market Report. The results include some interesting conclusions and cover: u Recruit budgets u Current recruitment needs u Skills / qualities / experience most in demand u Views on availability and salary expectations of candidates Contents This section is broken down into 3 parts: 1. Key conclusions 2. Audit survey results 3. Broader context (comparison with other areas of corporate governance) u Key recruitment drivers in 2016 u Recruitment intentions for 2016 Our survey of employers covered not only internal audit but also risk, compliance, legal and security. Respondents were individuals with responsibility for recruitment who were asked questions designed to elicit their perspective on the recruitment market. As a result, in addition to providing specific findings for internal and IT Audit, we are also able to make comparisons with the broader picture in corporate governance. 12

15 1 Key conclusions Even though recruitment budgets are increasing, as the demands on internal audit departments and other areas of corporate governance become greater, many Heads of Audit believe they are short of resources. Not surprisingly competition for internal auditors with the required experience and abilities continues to be intense and companies are finding it difficult to recruit. Intense competition for best candidates continues Fewer departments sufficiently resourced u Only 47% of managers believe their internal audit department is sufficiently resourced for the demands that are made on it (down from 53%) Pressures on recruitment budgets u 40% of internal audit departments report an increase in their recruitment budget (down from 49%) u Unlike previous years, IT audit budget increases are no more common than general audit u Increases more likely in banking, financial services and practice than other sectors Slight drop in recruitment activity u 71% of internal audit departments have recruited or attempted to recruit in the last 6 months, down from 77% u Banks and and practice have almost universally looked to recruit Difficulty in finding good candidates continues u 64% of managers report internal auditors difficult to find (down from 67%) u 71% of managers report they are finding it difficult to recruit (down from 73%) u Commercial companies most likely to report difficulties High salary expectations u 26% of managers (up from 24%) report salary expectations excessive and beyond their budget and only 35% consider salary expectations to be reasonable Good interpersonal skills increasingly hard to find u 51% of managers report that recruiting internal auditors with the required technical skills is the greatest challenge, with 49% reporting interpersonal skills the most difficult to find u Interpersonal skills have become more important when progressing an internal auditor to offer Minimum of 2 years experience is key u 81% of managers are most likely to recruit internal auditors with between 3-7 years experience u Only 6% are likely to look for internal auditors with less than 2 years experience Use of external resources on the increase u Only 20% of departments report they never or only on a very limited basis use external resources u 23% report they routinely or significantly use external resources u 27% report they are likely to become more reliant Significant demand to continue in 2016 u Only 15% (up from 12%) of managers report they are unlikely to recruit in 2016 u Replacement recruitment likely to be the key driver 13

16 2 Employer survey results Demand Fewer departments sufficiently resourced Q - Do you feel your department is sufficiently resourced for the demands that are made on it? Sector analysis 2015 Slight drop in recruitment activity Q - Have you recruited, or attempted to recruit, externally in the last 6 months? Sector analysis

17 Just 15% unlikely to recruit in 2016 Q - What are your recruitment plans for 2016? (Question not asked in 2013) Pressures on recruitment budgets Q - Has your recruitment budget increased in the last year? Sector analysis 2015 (Question not asked in 2013) Candidate availability Good candidates still hard to find Q - How would you rate the availability of candidates? Sector analysis

18 Continued difficulty in recruiting Q - Overall, have you found it difficult to recruit? Sector analysis 2015 Mimimum of 2 years experience is key Q - When recruiting, what level of experience are you most likely to request? 16

19 Interpersonal and technical skills equally important Q - What has been the greatest challenge? Q - In order of significance, what are the key considerations when deciding to progress a candidate to offer stage? Consideration Weighted average 2013 Weighted average 2014 Weighted average 2015 Interpersonal skills Technical suitability Cultural fit Perceived desire to work for the Company / Department Professional & educational qualifications Input from HR Recruitment resources Slight increase in in-house recruitment Q - What is your principal source of candidates? 17

20 External resources still vital Q - To what extent do you rely on external resources to achieve your audit plan? (Question not asked in 2013) Q - Do you anticipate your reliance on external resources changing? What is positive is that there are now more options open to contractors. (Question not asked in 2013) 18

21 Other findings Industry experience still key factor Q - In your experience, where are you most likely to recruit from? Salary expectations remain high Q - What has been your perception of candidate salary expectations? Diversity and inclusion targets rare Q - Do you have any diversity and inclusion targets that may influence your recruitment decisions? (Question not asked in 2013) Fundamental need is key recruitment driver Q - In order of significance, which will be the most important recruitment drivers in 2016? Factor Weighted average 2013 Weighted average 2014 Weighted average 2015 Replacement recruitment Business growth / development New regulation Business as usual New products

22 3 Broader context Rest of results The following tables compare the results from internal audit departments with those from risk, security & resilience, compliance and legal. Certain figures have been highlighted to make it quicker and easier to spot key differences. Demand Departments generally under-resourced Q - Do you feel your department is sufficiently resourced for the demands that are made on it? p As was the case last year, a high percentage of companies in all disciplines report being under-resourced p Resourcing problems highest in Compliance and Security High level of recruitment across all disciplines Q - Have you recruited, or attempted to recruit, externally in the last 6 months? p Around three quarters of companies across all disciplines have recruited or tried to recruit in the last six months p Highest level of recruitment in Compliance Recruitment budgets increasing in most areas Q - Has your recruitment budget increased in the last year? Area Yes it has increased No, it remains the same No, it has decreased Compliance 42% 49% 9% Risk 21% 56% 23% Internal Audit 40% 51% 9% Security 33% 58% 9% Legal 41% 43% 16% p With the exception of risk, where more budgets are decreasing than increasing, budgets are increasing in all other disciplines p The most significant increases are in Compliance and Internal Audit 20

23 High level of activity planned for 2016 Q - What are your recruitment plans for 2016? Area Likely Replacement Unlikely Compliance 48% 40% 12% Risk 24% 59% 17% Internal Audit 36% 49% 15% Security 59% 32% 9% Legal 45% 46% 9% p Whether for replacement, or newly created positions, a high level of activity is planned for 2016 p In Security and Legal, 91% of respondents expect to recruit in 2016 Candidate availability Good candidates remain difficult to find Q - How would you rate the availability of candidates? Area Plentiful Generally available Difficult to find Compliance 4% 21% 75% Risk 6% 44% 50% Internal Audit 5% 31% 64% Security 6% 43% 51% Legal 8% 33% 59% p Candidates difficult to find in all disciplines p Greatest pressure in Compliance p Least pressure in Risk and Security Successful recruitment even more difficult Q - Overall, have you found it difficult to recruit? p Around 70% of all companies found it difficult to recruit in 2015 p This figure rises to nearly 80% in Compliance 21

24 Key requirements Experience remains major factor in recruitment Q - When recruiting, what level of experience are you most likely to request? Area < 2 years 3-5 years 5-7 years 7-10 years > 10 years Compliance 11% 44% 26% 10% 9% Risk 5% 32% 41% 18% 4% Internal Audit 6% 62% 19% 11% 2% Security 5% 32% 31% 26% 6% Legal 7% 59% 17% 15% 2% p 3 or more years experience is key in all disciplines Technical skills still most important Q - What has been the greatest challenge? p As was the case last year, technical skills are the greatest challenge in recruitment across all disciplines p Interpersonal skills remain important, particularly in Internal Audit and Security Interpersonal skills key to making offers Q - In order of significance, what are the key considerations when deciding to progress a candidate to offer stage? Area Technical suitability Interpersonal skills (Please note that the legal results have been adjusted to match other figures as the legal survey didn t include the HR option.) Cultural fit Keenness Qualifications HR input Compliance Risk Internal Audit Security Legal p When it comes to progressing to offer stage, interpersonal skills become more important in all areas apart from Legal p They are now more important than technical skills in Internal Audit and Security p Technical suitability is the key in Legal 22

25 Recruitment resources Recruitment consultancies still main source of candidates Q - What is your principal source of candidates? Area Internal recruits Direct advertising / referrals Internal team / direct sourcing PSL of RECs Range of consultancies Compliance 13% 3% 9% 53% 22% Risk 30% 3% 13% 46% 8% Internal Audit 10% 8% 13% 51% 18% Security 23% 4% 24% 42% 7% Legal 6% 7% 19% 53% 15% p With the exception of Security, recruitment consultancies are the main source of candidates p The use of recruitment consultancies is highest in Compliance, possibly a reflection of the recruitment pressures departments are facing Salaries Salaries generally affordable Q - What has been your perception of candidate salary expectations? Area Excessive More than anticipated Reasonable Compliance 21% 65% 14% Risk 17% 52% 31% Internal Audit 26% 39% 35% Security 20% 66% 14% Legal 23% 60% 17% p Broad agreement that salary expectations are generally affordable p Least concern in Risk and Internal Audit p Greatest concern in Compliance and Security 23

26 07 Barclay ABOUT BARCLAY SIMPSON Simpson Bridewell Gate, 9 Bridewell Place London EC4V 6AW Tel: 44 (0) bs@barclaysimpson.com Barclay Simpson is an international corporate governance recruitment consultancy specialising in internal audit, risk, compliance, security & resilience, business continuity, legal and treasury appointments. Established in 1989, Barclay Simpson works with clients in all sectors throughout the UK, Europe, Middle East, North America and Asia-Pacific from our offices in London, New York, Dubai, Hong Kong and Singapore. We add value by using our unique focus on corporate governance, our highly experienced specialist consultants and access to both the local and international pools of corporate governance talent. Our strength lies in our ability to understand client and candidate needs and then to use this insight to ensure our candidates are introduced to positions they want and our clients to the candidates they wish to recruit. For more in-depth coverage, comprehensive reports and compensation guides exist for the Internal Audit, Risk, Security & Resilience, Compliance and Legal recruitment markets. These can be accessed from the links below. We also produce other specialist reports, each of which can be accessed for free on our website: If you would like to discuss any aspect of the reports please contact the following divisional heads: Corporate Governance Adrian Simpson as@barclaysimpson.com Internal & IT Audit Daniel Flynn df@barclaysimpson.com Risk Matt Brown mb@barclaysimpson.com Compliance Tom Boulderstone tgb@barclaysimpson.com Security Mark Ampleford ma@barclaysimpson.com Legal Jane Fry jf@barclaysimpson.com To discuss our international services please contact: Europe Tim Sandwell ts@barclaysimpson.com Middle East Chris L Amie cla@barclaysimpson.com Asia Pacific Russell Bunker rb@barclaysimpson.com North America Daniel Close dc@barclaysimpson.com 24