Strategy meets data science when it comes to SME lending, with Frank Gerhard (McKinsey & Company)

How to Lend Money to Strangers

Brendan le Grange

Credit, Fintech, Management, Lending, Banking, Business, Careers

5 • 2.6K Ratings

🗓️ 1 December 2022

⏱️ 31 minutes

🔗️ Recording | iTunes | RSS

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Summary

“This is not a small change, and it doesn't affect isolated groups. This is not just an IT problem. This is not just a modelling problem. This is not something the business can solve on its own. This really requires board attention to actually bring together those teams and ensure that there is really cohesion across the organisation.” - Frank Gerhard, Solution Associate Partner and CTO at Risk Dynamics, part of McKinsey & Co.

Gone are the days when senior business leaders could leave the data crunching to propellor-hat-wearing quants in a back room, now there’s a seat at the Boardroom Table for data and analytics, or at least there should be. In this episode, Frank and I speak about the strategic elevation of analytics and how innovations from just a year or two ago are already mere table stakes, but in particular, we talk about all of this in the context of SME lending where lenders are feeling them acutely.

I first found Frank via his co-authorship of this article on “How banks can reimagine lending to small and medium-size enterprises” but we also reference this article on “Designing next-generation credit-decisioning models” which is worth a read, and has more insights we had time to fully explore.

Frank is on LinkedIn and available via email, or for more insights from him and his colleagues, you can head over to https://www.riskdynamicsgroup.com/our-insights or https://www.mckinsey.com/

Frank also mentions Quantam Black, AI by McKinsey’s - their work is at https://www.mckinsey.com/capabilities/quantumblack/how-we-help-clients

Andrew Ng's thoughts on great data versus big data: https://spectrum.ieee.org/andrew-ng-data-centric-ai

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24

Oh, and if you’re in need of more banking podcasts, you can find related content at https://blog.feedspot.com/banking_podcasts/

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Transcript

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0:00.0	If you actually start at a board level thinking about why do certain things not quite work,
0:05.5	why are we losing market share, why are we not growing as fast as we can.
0:09.1	I mean, once you actually get into the engine room, you open the door, very often you find
0:13.8	data-related topics, modeling-related topics, infrastructure, process topics, really at
0:19.2	the heart of what's not working.
0:21.0	And I think this is what drove the firm really to bring colleagues like myself and a lot
0:26.6	of others on board, but also to bring on board entities like Risk Dynamics, really specialist
0:32.4	on risk model development, risk model validation, but also entities like quantum black and others
0:38.2	really focusing on data science and other engineering topics.
0:43.1	I imagine many students are like this, but late into my final year of university, I didn't
0:52.1	really know what I wanted to do next.
0:54.5	And I wasn't going to be picky.
0:56.1	I just wanted that first job.
0:58.4	So I sent my CV to every company in UCT's graduate recruitment handbook.
1:03.6	There were maybe 30 of them with at least a tenuous link to my degree, from which I got
1:08.4	three interviews.
1:10.0	There was the investment bank that had asked for a 100-word summary instead of the boring
1:14.6	old résumé.
1:15.9	For them, I bought a coconut, emptied it, enclosed it back with a little bit of that silver
1:20.9	chain that you get on the plug for your kitchen, holding in a few autobiographical notes.
1:26.1	I called it Brendan in a nutshell.
1:28.8	And according to people who ended up working there, it was still being spoken about years
	...

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