How to prepare for the future in today’s economy

on "July 22, 2020 1:14 pm"

Credit unions were facing slim margins even before the coronavirus pandemic. In today’s higher risk environment, your current risk mitigation plan may not be as aligned as is needed.


Reassess your risk appetite

The prolonged economic downturn is only expanding the scope of risk, which means your credit union’s strategic goals might not be as aligned with your risk appetite as you would like them to be. Your credit union’s risk appetite should be fluid enough to offer opportunities to grow your portfolio in different risk environments. If you’re not on the route to long-term, sustainable earnings, then adopting a new risk mindset should be one of your top strategic priorities.

Revising your current framework for assessing risk is key to helping you navigate risk. If you have a comprehensive risk function, then it’s going to be easier to collect the data you need to make informed risk decisions. Reassess your governance, risk management, and compliance (GRC) strategy. Take note of all the ways teams can share information across your organization. Here are some considerations:

  • Find a high-level executive or board member who is willing to champion a new risk appetite
  • Have a qualitative risk appetite discussion with key stakeholders

Invest in relationships

Because credit unions remain an important source of affordable credit for many Americans, strengthening ties as a community-focused institution should remain a top priority. Now is the time to show your members that you’re doing your best to provide the financial resources they need. Can you think of some creative ways the finance team can work with the lending team to offer other temporary relief that can be mutually beneficial for both members and your credit union? Can you save on collection costs if you allow members to differ some payments? Think about it.

Update Your Rulebook

It’s hard to prepare for a once in a lifetime type of event, but now that you’re working through the challenges of a pandemic, you can create your own new best practices that can help you better prepare your credit union for what may come next. Now is the time to consider adjusting your business continuity planning. Make sure that risk assessments are included with the latest data and forecasting to improve your planning with invaluable insights on trends with CUNA Environmental Scan (E-Scan).

Gather insights from industry thought leaders

For guidance on developing a framework to manage balance sheets and member needs, CUNA Framing the Future School is set for one-hour sessions on July 28, July 29 to July 30. You’ll focus on new ways to assess risk and reward by working through scenarios, including a capital and earnings burn-down approach.