White Paper

Changing the Risk Conversation

By CUNA Councils

posted 08.13.2020 (C & R)

Also Available: One Page Summary

If you could listen in on conversations about key issues taking place in credit unions every day, it would be easy to pick out the credit unions with an enterprise risk management (ERM) culture. That’s because evaluating risk is part of every conversation about operations, strategy, marketplace changes, and more.

“What these credit union leaders realize is, the pace of change internally and externally is so rapid that simply discussing risk annually or even quarterly is woefully inadequate,” said William C. Hord, vice president of enterprise risk management services at Quantivate, Woodinville, Wash. “We have to create or maintain a risk-based culture so business decisions are made with risk in mind from the outset, which in turn increases their chances of success and improves their capital deployment.”

Creating and maintaining an ERM culture combines leadership from the top with continuous education and communication. The credit union’s risk management leader plays a key role in this process by building partnerships that nurture widespread adoption of risk management practices.

For example, SECU, Linthicum, Md., relies on its ERM culture to break down silos and provide a bird’s eye view of risk across the organization. Sherry Joseph, vice president, risk management and compliance, said SECU built its ERM program for roughly seven years before transitioning to an ERM culture where it can “continuously seek iterative improvement to further optimize the culture over time.”

This white paper shares:

  • How credit unions with ERM programs recognize the need to adopt an ERM culture and begin the process of culture change.
  • Case studies of ERM culture adoption at Provident Credit Union, Redwood Shores, Calif., and 7 17 Credit Union, Warren, Ohio.
  • Why it’s important to avoid making risk management the “department of no” and instead practice “risk diplomacy.”
  • How credit unions can nurture an ERM culture, including best practices and mistakes to avoid.
  • The role of ERM software and consulting, as well as other tools that support decision-making.

Tony Ferris, CEO at Rochdale Paragon, Overland Park, Kan., said credit unions that create an ERM culture must be able to show where they have helped business line “owners,” the management team, and the board make better risk-weighted decisions.

“When you’ve reached that plateau,” Ferris said, “you’ve reached an effective level where culturally it’s engrained in the organization. People are no longer managing reactively but more proactively at a strategic level, answering questions about how much risk is necessary in meeting our goals, and what emerging risks threaten our success. It’s about the business, not about the risk management program.”

The ultimate reward for creating an ERM culture is that evaluating risk is no longer a special event. Instead, the ERM culture becomes the basis for ongoing conversation about what can make your credit union thrive and how to mitigate risk to help make that happen.

This resource is only available to members. Please login to download or explore member benefits and join today

 

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