Musings from the CU Suite

Jun 07, 2012

Ours is a Risky Business

Written by Anthony Demangone

If you are a senior manager or executive at a credit union, it pays to know about risk.  Risk, it seems, is popping up all over the place.

BSA risk management.  Liquidity risk.  Interest rate risk.  Compliance risk.  Risk-based compliance programs.  Enterprise risk management.  And the list goes on, and on...

If you had to guess, however, how many senior managers or executives could give an accurate overview of the following risks:

  1. Interest Rate Risk
  2. Liquidity Risk
  3. Credit Risk
  4. Compliance Risk
  5. Strategic Risk
  6. Transaction Risk
  7. Reptuation Risk
  8. Concentration Risk

NCUA has identified the first seven risks as key areas of focus for credit union operations.  The last one, concentration risk, is a new area of focus - especially given the recent corporate credit union crisis and financial crisis.

Understanding risk can be hugely beneficial for a credit union manager.  First, NCUA expects your credit union to manage these risks adequately.  Second, if you understand the risks well, you can build risk management into your decision process.  How will this issue/new product/opportunity affect our mix of risks, and what can we do to manage those risks in an adequate way? 

If you aren't up to snuff on risk and risk management, where do you start?  Perhaps you can start here. If you spend 30 to 45 minutes pouring over the following documents, you'll be on your way to a better understanding of risk.  

  1. Chapter one of NCUA's Examiner's Guide.  This chapter provides a good overview of NCUA's approach to risk.  
  2. Download Overview of Risks.  If you don't have a ton of time, I "ripped" out this five-page section of the chapter that describes each of the first seven risks above.  
  3. Download Risk Indicators.  This is a handy-dandy self-assessment that walks you through a number of questions or categories to determine your risk level in each of the first seven risks outlined above.  While it is a simple self-assessment, it is perfect for those new to risk management.
  4. Finally, this Supervisory Letter is the best place to start if you want an overview of concentration risk. 

I readily admit that there's a ton of other information written about risk management.  But this information was written by your regulator, NCUA.  It is the stuff your examiner will reference.  With that in mind, it is very worth your time.


Have a great weekend, everyone.  And here's hoping you catch a little trail magic this weekend.  Like when I attended the Nationals-Mets game last night and ran into my high school baseball coach, who is still turning out great ball clubs in Towanda, Pennsylvania.


Photo (3)
Me, George, and Coach