As fintechs have become increasingly complex and under more regulatory scrutiny, highly effective governance and risk management leaders have become essential to growing in a safe and controlled way and providing a compelling proposition for investors.
Those fintechs doing this successfully are planning ahead and appointing senior governance and risk leaders early. This allows them to take advantage of the considerable advice, guidance, and competitive advantage these individuals provide.
But for many established fintechs the key question is whether the first, more junior hires they made into risk, compliance and legal have the right experience for the company’s next phase of growth. They’re questioning whether their current leaders have operated at the scale, the international scope, or with the breadth of product offering needed to be successful as the business grows.
Whilst not all businesses are the same, we expect the following considerations to remain top of the agenda for fintech investors, boards, CEOs and HR leaders through 2024.
Top Talent Considerations for Fintechs in 2024
Many fintechs, and the vast majority of those that are listed, have elevated two positions covering risk, compliance, and legal to the board’s Exco (executive council): a Chief Risk Officer, responsible for both risk and compliance; and a General Counsel, responsible for legal and company secretariat.
However, having both leaders on the Exco is not enough. It has been shown that real success in these roles is dependent on appointing leaders with the commercial sense to advise, challenge and guide effectively. The Chief Risk Officer and the General Counsel must have the breadth and depth of experience to be strategic business leaders, able to add value outside of purely being the risk or legal voice in the room.
The compliance officer is often the first control hire and is invaluable to obtaining and maintaining regulatory licenses. Compliance officers who join fintechs early need to be able to step up to become advisory and commercial Head of Compliance. They’ll have to demonstrate they can grow their function and hire and develop specialists to lead sub-teams, or someone with more experience should replace them.
Financial crime controls present a high regulatory risk for many fintechs, requiring specialist talent. Initially, this role is part of compliance but it is very soon spun out, with a dedicated Head of Financial Crime quickly appointed. This leader must be able to influence across all areas of the business from commercial functions to operations to ensure compliance, whilst not impacting customer experience.
The General Counsel adds huge value in being the point person for large parts of the IPO process, in addition to ensuring effective broader legal support to the business. Getting the GC in place ahead of time is essential so they have the trust of the leadership, investors and the board, and can influence and executive effectively.
Often the General Counsel or an individual reporting to them, Company Secretaries with excellent stakeholder management skills and high emotional intelligence have provided fintechs with an invaluable link between fintech executive leadership teams, boards and investors. They ensure alignment and highly productive relationships. If the General Counsel is also the Company Secretary, a strong Deputy Company Secretary, with experience at a listed firm, has been needed to build the team and run it effectively day to day.
As firms develop to provide effective oversight of the business and meet regulatory obligations, it is necessary to bring in technical risk specialists to support the Chief Risk Officer. These individuals must be able to able to educate the wider firm, gain support for change, and set up additional controls. Chief Risk Officers have hired risk leaders with technical expertise to provide coverage of non-financial risks, such as cyber security, third party and resilience, and financial risks: including credit, capital and liquidity.
Heads of Compliance have decided that they need high-caliber expertise to support them in keeping abreast of regulatory change. That includes applying for new licenses and managing regulatory relationships, as well as replying to consultation papers and helping influence policy. The most successful Regulatory Affairs Officers are commercial operators who have spent time at a regulator, and can successfully marry their understanding of regulations and what regulators are looking for, with the ability to advise up to the board level.
Fintechs have created proper delineation between the first and second line of defense, operations and oversight functions. They’ve transferred operational activities from compliance, fraud and financial crime into the business. This has often required bringing in operational leaders with a strong regulatory understanding who have come from larger organizations that have already made this transition.
Fintechs will review the strength and suitability of their board, because the experience and capabilities of board members will need to change as the firm changes. Risk and governance considerations have led fintechs to make additions to the board to ensure that enough of its members have been involved in businesses of sufficient scale, complexity and regulatory scrutiny.
