Musings from the CU Suite

Apr 26, 2012

Staff Concentration Risk; Save! Save! Save!

Written by Anthony Demangone

NCUA and other financial regulators now focus on "concentration risk." The following guidance comes from NCUA Letter to Credit Union 10-03. (Enclosure.)


"A risk concentration is any single exposure or group of exposures with the potential to produce losses large enough (relative to capital, total assets, or overall risk level) to threaten a financial institution’s health or ability to maintain its core operations."


The guidance focuses on investments and products.  What about people?  I'd bet you my last dollar that employee concentration risk can be just as dangerous.  Let me ask you a few questions.

  • Do you overwork your talented people, because they'll "get it done?"
  • Have you ever uttered the following?  "If we lose (him or her), we're in deep trouble."
  • Are there divisions within your credit union where a star player keeps saving the day?
  • Do you expect more out of your talented employees while accepting less from others?

Clearly, talented staff is a scarce commodity.  Many businesses struggle to attract and retain high-performing employees.  That is no excuse, however. I'd recommend the following:

  1. Look for employee concentration risk within your credit union.  Try to put a finger on whether talented employees are hired and retained at your credit union.  Or whether you constantly lose your star players.
  2. Once you've identified your key players, let them know how important they are.  Treat them like key partners on your road to success. Because that's what they are. If your credit union started driving away your best members, you'd investigate the cause immediately. Treat your key employees the same way.  When one departs, find out why. 
  3. Deepen your bench.  Look at your job descriptions and advertisements.  Do they truly describe the person that you want to attract?  Work with your HR team to find ways to attract and keep the best employees.  Be patient during the hiring process.  Study where it has broken down in the past, and try to improve it moving forward.  But be honest with yourself.  If you are describing your workplace as fun and dynamic, is it true?

No organization can eliminate all employee concentration risk.  The good ones, however, effectively manage it.  I have much to learn about management.  The more I learn and experience, however, the more this becomes clear: Behind every successful organization is a team of fantastic, motivated employees.


Not that long ago, I asked for some cost-savings ideas.  Here are some of the responses...

  • I’m saving money this year by (hopefully) getting my NCCO by studying at home using the brand new GPS manual and taking my tests here, instead of attending a NAFCU or CUNA compliance conference.
  • Although I don’t have the budget numbers to back this up we are presumably saving money by utilizing our fleet of company vehicles for all work related travel.  The purchase price and maintenance of these vehicles is less than the cost of mileage for all of our staff using their own cars, plus we get the added benefit of marketing rolling down the highway throughout our field of membership (and in some cases, beyond).  
  • When I joined the Credit Union six years ago, I noticed that there was over six thousand dollars in funds due the organization on hold in Tallahassee that had been escheated over the years.  Quite often, the money was in the form of official checks payable to the Credit Union that had been lost in the mail or misdirected.  The credit union never had simply applied to get the cash back.  Every state has an escheatment department, usually located in the state Treasurer's office.  On-line searches are easy and the redemption process very doable.  Look periodically, as the listing refreshes every now and then and new stuff appears as it cycles through the five year process.
  • A few years ago we started a recycling program where our local recycling center would come pick up the various papers, leftover boxes, etc. that they could use.  We discovered that not only could we reduce the size of our trash dumpster by 50%, but we could reduce the number of pick-ups in half!.  Annual savings = $6,000 and it is good for the environment.  We encourage our staff to bring their home recyclables on Wednesdays and we have Members days for the same purpose.  This also makes our local recycling center more profitable as they have more material to process.  

Thanks for sharing these tips.  (I still have some more in reserve.) By all means, if you have other cost savings tips, please share them!

Have a great weekend, guys.