The NAFCU Journal March - April 2018 - 25

inherent in the business,' " Hord continues. "That means looking at risks before
you make decisions, not afterward." He
likens it to the old Smokey Bear public
service announcements: "Credit unions
need to prevent fires rather than put
them out after they've started."
Dan Patterson, chief financial officer at
SAC Federal Credit Union in Papillion,
Neb., adds, "Risk assessments need to be
completed and re-evaluated on a regular
basis, and risk needs to be really evaluated. ERM done incorrectly, with very
little thought or time committed to it, will
not yield the same results as spending
more time evaluating risk and utilizing
ERM as a true risk-mitigation tool."
The $902 million credit union has an
ERM committee consisting of representatives from all of SAC's departments. The
committee reviews risks, determines how
they should be rated, discusses mitigating
factors "and makes sure we are looking at
our entire credit union, as well as outside
factors that could impact SAC," Patterson
says. "We also provide full risk assessments to our board as they are completed,
which is several times a year."

SHOWING YOU
UNDERSTAND RISK

"The regulators are putting more and
more pressure on boards and management to show they understand how risks
across the credit union could impact
their strategy," Hord stresses.
Patterson agrees and says, "The last time
we had an exam, NCUA was pleased to
see that we had implemented an ERM
program and established a working
committee that meets regularly. They
also were pleased that this information
is shared with our senior management
team and board. It helps to show the
examiners any higher-risk areas we've
identified and what we are doing to mitigate those risks."
Here are a few risks of special concern:

Compliance

"Compliance has been a continuing
issue as more regulations get added or
THE NAFCU JOURNAL  MARCH-APRIL 2018

changed," says Patterson. Adds Crystal
Francisco, vice president of compliance
and training at Pioneer West Virginia
Federal Credit Union, "For smaller credit
unions in particular, the regulations are
just enormous."
Bruyere says ERM can help with the
increasingly complex requirements that
impact a credit union. "How do you
make sure all of the business units in
your credit union are ready for these
regulatory changes? ERM is probably the
most strategic way of addressing that."

Cybersecurity

"Bank Secrecy Act and cybersecurity remain high priorities for NCUA
examiners," says Bruyere. "Cybersecurity
seems to get more in-depth almost every
time. Over the course of the last few
years, NCUA has put more resources in
this area."
"The examiners are appropriately
looking closely at risks associated with
information technology and data security," adds McGowan. "We have a strong
IT security program in place, but that
by no means assures that we will not be
hacked at some point. This is the one
risk area which has always had me the
most concerned."

Member protection

"There is the risk of ensuring that you
are not going to be another Wells Fargo,"
says Hord. "Credit unions do a good job
of serving their members, but when you
look at it purely from a risk perspective,
what's your complaint management
process? How do you ensure that you are
getting back to the member in a timely
fashion? How are you training your
staff? There's a risk there."

Data management

"At the end of the day, you need effective
data management," says Hord. "Credit
unions are hiring data analysts, third
parties that can analyze their loan,
marketing and core databases. It's no
different on the risk side. How do those
risks interrelate, and are you effectively
applying controls in the best way to
mitigate them?"

RISK IS HERE TO STAY

"Risk isn't going away," says McGowan.
"If anything, we're going to have more
and higher levels of risk in the future."
While some might not want to hear that,
McGowan says credit unions need to
"look risk in the eye and stare it down."
Training plays a big part in that, says
Francisco. "When we look at our
internal audit results, it's not to see if
someone's doing something wrong but
to identify training needs for the organization. You have to be able to explain
the 'why' behind staying compliant,
and that makes us stronger and helps
our staff grow. When the staff understands the big picture, then you can
begin to realize the strategic objectives
of the institution."
Credit unions are learning that for ERM
to work, senior management must be
held accountable for risk management
activities. The board must be educated
on risk management issues, and staff
must understand that risk management
is part of their job.
As Porter noted more than two decades
ago, "There's a fundamental distinction between strategy and operational
effectiveness. Strategy is about making
choices, trade-offs; it's about deliberately choosing to be different." ERM
provides a unified view of risk and a
way to manage it systematically. By
linking strategy, risk and performance,
credit unions can achieve the "difference" that sets them apart from other
financial institutions.
Credit union leaders and staff can learn
more about ERM during NAFCU's Risk
Management Seminar, Aug. 13-15 in
Denver (www.nafcu.org/risk).
Jay Morris is president of Jay Morris
Communications LLC, a public relations
and marketing firm in Alexandria, Va. He
writes on technology, business and credit
union issues. He can be reached at
jmorris@jmcomllc.com.

25


http://www.nafcu.org/risk

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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