Financial Services HR Leaders Focus on Risk and Pay

Hong Kong, 9 January 2012 – Pay for performance remains top of mind priority for financial services with 33% of senior human resources professionals from the financial services industry identifying refinement of incentive plans, risk metrics, governance as the most important Human Resources priority in the next 12 months, according to a Towers Watson poll. This represents a stronger focus on pay issues than other HR-related initiatives such as right sizing (21%), HR infrastructure, system, delivery model (19%) and succession planning (18%). The poll also indicated a lower level of interest by this group for the extension of pay rebalancing system (9%).

The Towers Watson poll was conducted in Hong Kong, and involved close to 60 senior human resources professionals from over 50 of the largest global banking and financial services organizations in the world. In round-table discussions, the impact of the regulatory environments in Asia Pacific and how financial services bonuses are structured and funded to reflect performance also ranked high in the discussion agenda of the participants.

In addition, close to three quarters (74%) of the group believed that executive base salary levels have stabilized in Asia Pacific while the poll showed that the group was almost equivocal about the general direction of year-end incentive pay (53% voted up, 47% down). However, there was a general agreement by 70% of the respondents that total expected compensation trends from 2010 to 2011 were going to be between flat to up 10%.

Chris Fabro, global Co-Lead of Towers Watson's Talent & Rewards Financial Services Practice said, “Global financial institutions face many issues that connect human capital challenges across pay, performance, risk, regulation, culture and governance. Given the dramatic evolution of pay policies and structures, sufficient linkage to other human capital priorities such as talent management, risk culture and engagement are essential.”

Overall, the tougher global economic environment means that the percentage of those getting zero incentive will increase across the board (a total of 47% of the respondents cited that between 5 and 20% of incentive eligible employees will receive zero incentive this year). However, the outlook for Asia remained still more positive than for EMEA and the US in terms of compensation dollars spent, pay increases and prospective recruitment in the financial services industry, showing that the sector in Asia is also less affected by headcount reduction.

In fact, China and Hong Kong were still regarded as the hottest talent markets in Asia by 38% and 32% of the respondents respectively, reflecting the still strong prospect of growth for those markets.

Jeffrey Tang, Asia Pacific Regional Leader of Towers Watson’s Talent & Rewards Financial Services Practice said, “The financial services industry is beginning to reshape its strategies in response to altered global business environments. Many of these organisations in Asia are looking to fundamentally align their talent management and workforce practices to adapt to the business environment. Top of mind will be pay strategies that reinforce the pay-for-performance culture, differentiate among people’s roles, skills and performance; and attract the right talent to ensure market competitiveness.”

The poll, recently conducted at a Towers Watson’s conference in Hong Kong, was taken by senior regional and local human resources leaders in banking and financial services. The conference, designed to address pressing human capital management challenges in the financial services sector, included sessions on the following topics:

• Business issues and implications for the Industry
• Pay trends, ccompensation plan design – evolving approaches to compensation, delivery mechanisms and communication strategies;
• Payout ratios
• Regulatory updates
• Business performance & pay projections
• Asia bank performance & pay summary

About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.