The Federal Credit Union May-June 2015 - (Page 24)
Credit unions already assess their risk
exposure based on CAMEL requirements and NCUA's seven risk factors:
credit, interest rate, liquidity, transaction,
compliance, strategic and reputation.
ERM is the umbrella for coordinating
these areas, providing a unified view
of risk and improving the institution's
ability to manage it effectively.
"The goal is not to make it massively
complex or overly burdensome," says
Andy Vanderhoff, CEO of Seattle-based
Quantivate. A NAFCU Services Preferred Partner for vendor and contract
management, Quantivate provides governance, risk and compliance software
solutions for credit unions.
"If you're doing ERM right," Vanderhoff
says, "you're not creating a brand-new
set of risk controls or measurements;
you're analyzing and measuring what
you're already doing in a larger economic framework."
10 Tips From Those
Who Have Done ERM
tarting the ERM process can seem daunting, especially
if you are a smaller credit union. Here are tips from
those who've been there:
Walk before you run. "Appropriately set expectations," advises Andy
Vanderhoff, CEO of Quantivate. "ERM
is a journey that takes quite a few
years. Take steps slowly and surely to
Don't shove it down people's
throats. "ERM doesn't mean that you
throw away everything that's already
been done," says Vanderhoff. "Build on
the effective risk culture that got you
to this point. Don't dismiss it."
Start at the top. "ERM may get
assigned to a midlevel management
person," says Jeff Owen of the Rochdale
Group, "but it needs to start with the
CEO and board. They should set the
tone and embed the ERM culture
across the institution."
Give everyone a voice. "IT, business
continuity, information security -
these are functions that may feel like
they don't have a very big voice in the
organization," says Vanderhoff. "Make
sure their voices get heard."
Get the right people on board. "You
want people on your committee who
can be allies of ERM," Vanderhoff says.
"Pick people who will help you create
and support the ERM culture, not
Essentially, ERM is a way of getting the
organization to think about risk
in new ways.
Looking at risk in new ways
Margie Johnson, vice president of
regulatory affairs and enterprise risk
management at the $760 million SAC
Federal Credit Union in Omaha, says,
"When I first looked at ERM four years
ago, my thought was, 'Why do we need
this?' What I didn't get then is how ERM
interrelates with other departments.
It's not just a single, siloed department
working on something; we're sharing
what we've identified with other areas of
the credit union."
Joan Moran, CEO of the $70 million
Department of Labor Federal Credit
Union in Washington, agrees. "ERM
really makes you change how you think
about your business. It's not just about
conducting a quarterly risk review, it's
about using ERM to analyze what's
coming up, whether that's a core conversion or a merger."
Leverage the work you've already
done. "You don't need to reinvent the
wheel," Vanderhoff says. "You may
already have an internal audit function and a compliance department.
Leverage and integrate those to drive
Think through your data collection
needs. "The last thing you want is
another data silo," cautions Vanderhoff.
"There should be a valid business
driver behind the data you collect."
Get the process down before you
automate. "Process precedes automation," Vanderhoff states. "If you're
looking for software, ask in-depth
questions about what kind of process
It's not a one-time thing. "ERM isn't
a once-a-quarter, once-a-year thing,"
notes Department of Labor Federal
Credit Union CEO Joan Moran. "It's
something that you should be doing
all the time." Says Owen, "Combine
ERM with ongoing strategic planning
to give life to your program."
10 Learn as you go. "Don't be afraid of
the process," suggests Margie Johnson
of SAC Federal Credit Union. "It's a
work in progress, and we're always
learning." Adds Vanderhoff, "With ERM,
you want to enjoy the journey, not
just the destination." - J.M.
A good example, says Moran, is the
federal government's shutdown in 2013,
THE FEDERAL CREDIT UNION MAY-JUNE 2015
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The Federal Credit Union May-June 2015