The NAFCU Journal March - April 2018 - 24

''

I don't know how credit unions
can offer a new product or service
without running it through some
type of risk matrix.

''

- JOAN MORAN, CEO, DEPARTMENT OF LABOR FEDERAL
CREDIT UNION

The successful credit unions are
the ones able to innovate and adapt
quickly, but also decide what not to
do based on their strategic plan and
risk appetite. For many, enterprise risk
management (ERM) has become an
effective means of staying on top of
the dizzying pace of change and the
increased burden of regulation.

COSO'S ERM FRAMEWORK

They have drawn on NCUA's Letter
to Credit Unions 13-CU-12 (November 2013), which discusses the ERM
framework developed by the Committee
of Sponsoring Organizations (COSO).
Created in 2004, the COSO framework is
the blueprint for organizations interested
in establishing an ERM program.
"A growing number of credit unions are
now doing some form of ERM," observes
NAFCU Vice President of Regulatory
Compliance Brandy Bruyere. "Many see
it is an efficient way to manage risk.
"From a compliance perspective," she
adds, "ERM increases the credit union's
understanding of how various requirements impact the entire organization.

INTEGRATING STRATEGY
WITH PERFORMANCE

Last fall, COSO issued an updated ERM
framework, "Enterprise Risk Management - Integrating With Strategy and
Performance," to help organizations
prioritize risks and measure how they
impact performance.
COSO noted that ERM "is no longer
focused principally on preventing the
erosion of value and minimizing risk to
an acceptable level. Rather, it is viewed
as integral to strategy setting and the
24

identification of opportunities to create
and maintain value."
The links among risks, strategy and performance are a key feature of the 2017
update and one that William Hord, vice
president of enterprise risk management
services at Quantivate, believes credit
unions need to consider. A NAFCU
Services Preferred Partner, Quantivate
provides financial institutions with software solutions to implement ERM and
manage compliance.

BEYOND OPERATIONAL
RISK ASSESSMENT

"A lot of credit unions think that simply
doing operational/business unit risk
assessing is ERM," says Hord. "It's certainly a vital component of ERM, but
often it is missing the strategic element.
... Risk management is not about managing risk; it's about making better business
decisions with risk in mind."
Hord directed the ERM program at
Financial Center First Credit Union in
Indianapolis before joining Quantivate
in 2015. He advocates viewing ERM as a
strategic road map. "Some see ERM as a
kind of bolt-on," he says. "It's not. When
ERM becomes part of the decisionmaking process, part of the credit union's
culture, that's when it becomes effective."
You might expect larger credit unions to
be ahead of smaller ones in the adoption
of ERM, but that isn't the case. Hord is
currently working with three very large
institutions (more than $1 billion each)
that are just now embracing ERM. At the
same time, small credit unions such as the
$89 million Department of Labor Federal
Credit Union (DOLFCU) in Washington,
D.C., have been doing ERM for years.

'YOU NEED AN ERM
APPROACH'

DOLFCU CEO Joan Moran explains
that she used an outside consulting firm
to set up her ERM program. The credit
union also is a member of a regional
CUSO that provides compliance and
auditing assistance.
"The regulator may not require us to
do ERM," she says, but "it still wants to
know how much risk you are mitigating
and how much remains. You can't determine that without some kind of ERM
approach. We've especially seen that with
IT and cybersecurity.
"I don't know how credit unions can
offer a new product or service without
running it through some type of risk
matrix," Moran adds.

A HOLISTIC VIEW

Dan McGowan, president and CEO of
Pioneer West Virginia Federal Credit
Union in Charleston, W.Va., says his
$200 million credit union began moving
toward ERM in 2011. Its ERM effort
grew out of its compliance committee,
"the very first arena we felt we needed
to tackle, even before our aspirations
toward ERM came into play," he relates.
"ERM isn't always a matter of identifying specific issues," he says of its
benefits. "You might say the process
gives us a holistic view of the world
around us, creating awareness of both
risk and opportunities, and enabling
better decision-making."
Hord argues that because ERM leads
to informed business decisions, credit
unions can deploy their capital much
more favorably. "Credit unions that
adopt ERM are able to aggregate data
and see risks that may materialize, and
make adjustments and decisions based
on that information sooner rather than
later," he says. "If credit unions wait until
the risk is upon them, they won't have a
lot of time to make those decisions."

PREVENTING FIRES

"The regulators have always said, 'We
want you to understand the risks that are
THE NAFCU JOURNAL  MARCH-APRIL 2018



Table of Contents for the Digital Edition of The NAFCU Journal March - April 2018

Conferences
From the Chair
Your Washington Watchdog
Advocacy Snapshot
Washington and Industry Briefs
Growth Strategies
Understanding Risk and Managing It
The Board of Directors
Best-of-Class Strategies for Retaining Top Talent
Executive Spotlight
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal March - April 2018 - Cover1
The NAFCU Journal March - April 2018 - Cover2
The NAFCU Journal March - April 2018 - 1
The NAFCU Journal March - April 2018 - 2
The NAFCU Journal March - April 2018 - Conferences
The NAFCU Journal March - April 2018 - From the Chair
The NAFCU Journal March - April 2018 - 5
The NAFCU Journal March - April 2018 - Advocacy Snapshot
The NAFCU Journal March - April 2018 - 7
The NAFCU Journal March - April 2018 - Washington and Industry Briefs
The NAFCU Journal March - April 2018 - 9
The NAFCU Journal March - April 2018 - 10
The NAFCU Journal March - April 2018 - 11
The NAFCU Journal March - April 2018 - 12
The NAFCU Journal March - April 2018 - 13
The NAFCU Journal March - April 2018 - 14
The NAFCU Journal March - April 2018 - 15
The NAFCU Journal March - April 2018 - 16
The NAFCU Journal March - April 2018 - 17
The NAFCU Journal March - April 2018 - 18
The NAFCU Journal March - April 2018 - 19
The NAFCU Journal March - April 2018 - Growth Strategies
The NAFCU Journal March - April 2018 - 21
The NAFCU Journal March - April 2018 - Understanding Risk and Managing It
The NAFCU Journal March - April 2018 - 23
The NAFCU Journal March - April 2018 - 24
The NAFCU Journal March - April 2018 - 25
The NAFCU Journal March - April 2018 - The Board of Directors
The NAFCU Journal March - April 2018 - 27
The NAFCU Journal March - April 2018 - 28
The NAFCU Journal March - April 2018 - 29
The NAFCU Journal March - April 2018 - 30
The NAFCU Journal March - April 2018 - 31
The NAFCU Journal March - April 2018 - 32
The NAFCU Journal March - April 2018 - 33
The NAFCU Journal March - April 2018 - Best-of-Class Strategies for Retaining Top Talent
The NAFCU Journal March - April 2018 - 35
The NAFCU Journal March - April 2018 - 36
The NAFCU Journal March - April 2018 - 37
The NAFCU Journal March - April 2018 - 38
The NAFCU Journal March - April 2018 - 39
The NAFCU Journal March - April 2018 - Executive Spotlight
The NAFCU Journal March - April 2018 - 41
The NAFCU Journal March - April 2018 - Management Insight
The NAFCU Journal March - April 2018 - 43
The NAFCU Journal March - April 2018 - Compliance Central
The NAFCU Journal March - April 2018 - 45
The NAFCU Journal March - April 2018 - Inside NAFCU Services
The NAFCU Journal March - April 2018 - 47
The NAFCU Journal March - April 2018 - From the President’s Desk
The NAFCU Journal March - April 2018 - Cover3
The NAFCU Journal March - April 2018 - Cover4
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