Credit risk and analytics

Chief Credit Officer

The role of chief credit officer‍

This role involves managing the company’s credit risk, setting credit policy and strategy, and ensuring compliance with regulatory requirements related to credit operations.

A chief credit officer is going to be mostly first line and will manage your credit-oriented functions -- your credit underwriting, acquisitions and originations of customers. By contrast, your second-line fuctions would be things like chief risk officers who manage financial services compliance, corporate compliance.

When to hire a chief credit officer

A chief credit officer is essential in financial institutions or companies offering credit services, particularly when expanding into new credit products or markets.

The businesses that are most successful bring them in as early as possible. Placing a talented person should also be prioritized over bringing in a stop-gap solution. The businesses LF Partners has worked with that operate the best and scale the fastest have a top-decile credit team from the beginning.

We have seen examples of comapnies that did not start out as native lending businesses that expanded to become lenders. In these instances, a Series A or Series B company may need to being in a chief credit officer to start that line of business. This is even more important if the founders are former engineers or product-type leaders with little or no experience in credit.

What makes a world-class chief credit officer?

A world-class chief credit officer possesses deep expertise in credit risk analytics, a strategic mindset and the ability to balance risk with growth opportunities. They are highly analytical and skilled in risk assessment.

They will be extremely quantitative and data-driven, often business-minded and focused on strategy. A world-class officer is likely someone who's built credit policies and who's worked across the customer life cycle from top-of-funnel acquisition stage through collections and recovery stage.

Positions LF Partners has placed

• Chief Credit Officer, Rain
• Head of Credit, Klar
• Head of Credit, MudFlap
• Head of International Credit & Data Science, Empower
• GM of Lending (Chief Credit Officer), Remitly

Chief Risk Officer

The role of the chief risk officer

The chief risk officer is tasked with identifying, analyzing, and mitigating internal and external risks to the business. This role involves overseeing the implementation of risk management practices and policies across the company.

While the chief credit officer has more of a focus on analytics, credit policy, strategy and pricing, a risk officer's remit is more about the large customer service type teams

When to hire a chief risk officer

You would hire a chief risk officer when the company reaches a complexity requiring sophisticated risk assessment frameworks, or in response to increasing regulatory demands.

If you have a native lending business, you would likely start with a chief credit officer and then a chief risk officer would evolve over time. Unless you are a public company, you are unlikely to need both a chief risk officer and a chief credit officer -- it would probably just be a chief risk officer doing both chief credit officer and chief risk officer functions.

What makes a world-class chief risk officer?

A world-class chief risk officer has an exceptional ability to foresee potential risks and implement preemptive measures. They are well-versed in regulatory requirements and have strong problem-solving skills.

Training and pedigree are important in these roles and you typically see the best leaders in these functions come from the largest banks, like Capital One or similar institutions that are known for exceptional bank analyst development programs.

They also likely combine that background with regulatory chops. Risk officers who have worked with regulators and who are capable there are going to work with leaders across the business. They work very closely with the chief product officer and the COO, so they have to have a general athlete-type profile.

Finally, the best risk officers have multiple product experience -- hard lending, auto lending, small-business lending. If people had multiple product lines in their first- and or second-line experience as a risk leader, that's a green flag for search firms.

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Positions LF Partners has placed

• Chief Risk Officer, Current
• Chief Risk Officer, MudFlap
• Chief Risk Officer, Billd
• Chief Risk Officer, Keyway

Head of Data Analytics

The role of the head of data analytics

This leader manages the company’s data analytics and business intelligence efforts, using data to inform strategic decisions and improve operational efficiencies. The head of data science position is naturally a highly technical type of role.

These roles place a heavy emphasis on machine learning, largely depending on coding languages used. They create productionized machine-learning models that are able to teach and learn on their own and they identify other data sources that increases the precision and accuracy of a model.

There might be new tools that this head of data science can use to ask to acquire different types of data assets and perhaps operate a bit faster with their existing data assets, but it’s unlikely you need someone specifically on the absolute forefront of AI revolution.

LF Partners conducted one search recently where the company needed someone that could productionalize models, taking the rough credit model and rough acquisition model, and making it production-ready as opposed to just a desk-analyst model.

When you get into those types of dynamics within the role, you want people that have done it before. The issue sometimes is that if you're hiring just for head of data science, that person's probably going to end up getting topped out pretty quickly in an organization and you want them to be a strategic lever for the business.

There is a world where if you have a strategic-minded person, a commercially-minded person, you could have someone that says, “We have all this interesting data, why don't we develop a product that monetizes these insights that we uniquely have?”

You aren't going to hire someone that's been in hospitality to be your head of data science for a credit business where you have to understand how to take data from TransUnion and other third-party providers and pull it all together into a model that actually leads to insights into making better decisions.

There’s the technical building of the data science function and then there’s the analysis of the outputs that you get from your model. The balance somewhat depends on the size and scale of the business.

Think of it like the medical tech versus the surgeon. When you have an MRI, a medical tech will make sure that there's no false positives in the scan and that the machine worked fine and it produced a result that we can then interpret. But it probably is not going to be their job to interpret those results. Likewise, in a credit business, the head of data science could collect the information and make sure the data was clean and in a position to be interpreted, but it’s ultimately the chief credit officer who will be taking action based on the assessment and findings of the data.

When to hire a head of data analytics

‍A head of data analytics is hired when the company prioritizes data-driven decision making, often during periods of growth or when entering new markets.

With this role, it depends on where the company is on its growth curve – some companies may initially use more junior resources for various aspects of data science and analytics, but once you get to a certain size and scale, you need someone overseeing these functions.

There's often a zero-to-one component with these searches, more than for other areas. A company may not have had a director of data science before, so that new hire is going to be coming in and before they can get to the analysis part of their work, they're going to be making sure that the data being ingested is clean and that they’re able to feed this data that comes in to all these different parts of the business in a way that's interoperable. There’s foundational work to be set up to create an ability for everyone to read off the same sheet of music.

What makes a world-class head of data analytics

A world-class head of data analytics is proficient in data science, with the ability to extract actionable insights from complex data sets. They are innovative and possess strong leadership skills.

A world-class head of data science will have developed a variety of highly accurate complex models that have been able to help leaders make better decisions. It sounds basic, but you also need someone who has elite business knowledge and who can understand where the business is going. You can have a world-class quant in a head of data science role, but if they don't really understand how to perfect and make a model more effective, at best they are going to be good but not great.

There are a lot of solid data science managers or directors who can process and think in a really quantitative way. The elite ones are also world-class strategic thinkers.

Positions LF Partners has placed

• Director of Data Science, Renew Financial