Embrace Risk to Identify New Opportunities

By Dennis Chaptman06.12.2019

Ken Schaafsma likens setting a risk threshold to crossing a speed bump. When you’re about to make impact, it’s time to slow down.

"Sometimes risk appetites are quantitative, sometimes they’re qualitative,” says Schaafsma, vice president of enterprise risk management (ERM) and chief risk officer at $10.6 billion asset Alliant Credit Union in Chicago. “Most of the time, they’re both. Below that risk appetite level, our executives have set tolerance levels—kind of like speed bumps—that warn us when we’re getting close to the risk appetite.”

ERM is one early warning system that allows credit unions to both manage risks and tap new opportunities. The discipline is a comprehensive, organization-wide framework that aligns risk with risk appetite to fulfil strategic objectives.

“ERM helps an organization define, track, and measure risk in a holistic environment,” says Cathy Smoyer, senior vice president and chief risk officer at $8 billon asset Mountain America Credit Union in Sandy, Utah.

It both sharpens strategic thinking and communicates to others in the organization how to deal with risk.

“It allows management to make good, risk-informed decisions,” Schaafsma says. “They can choose to avoid risks. They can choose to reduce risks. They can choose to accept risks. It gives management a framework in which to understand and respond to the risks they face.”

“Business involves taking risks,” says Tony Ferris, CEO of Rochdale Paragon Group, which provides ERM consulting. It’s all about “making business decisions around uncertainties and making that a business process that has a financial return.”

(via Credit Union Magazine)


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