NCUA Makes it Clear: Credit Unions Are in the Risk Management Business

Reading through NCUA’s recent bulletins, one thing becomes clear: credit unions will be under more scrutiny to assure risk management measures meet at least minimal expectations.

On November 13, 2013, NCUA issued Supervisory Letter No. 13-12 Enterprise Risk Management (ERM). I recommend credit union managers carefully read Supervisory Letter No. 13-12.
Even though this Supervisory Letter states that “natural person credit unions are not required to implement a formal ERM framework”, it is obvious that ERM concepts will be in the backs of examiners’ minds when they audit credit unions. The Letter states:

“Examiners are expected to take a risk based approach to evaluating a credit union’s risk management processes by considering:

  • the credit union’s risk posture, risk appetite, and risk management strategies;
  • the depth and breadth of potential exposures including the types of products and services offered by the credit union;
  • the strategic objectives and operational policies, procedures, and controls in relation to potential exposures;
  • concentrations of risk;
  • risk mitigating factors;
  • capability and resources of management; and
  • the financial strength of the credit union in relation to assets and activities“

Examiners will be looking to see how credit union managers manage their specific risks.

Managers will want to draft a policy and follow a process that assures examiners the credit union performs all of its functions with risk management as a priority.

For management teams of all but the largest credit unions, this may seem like a daunting task.

However, Thompson Consulting and Training (TCT) offers a cadre of services that ease much of the ERM burden weighing down credit union executives.
In the December 2013 edition of TCT’s newsletter, Dollars and Sense, I listed the primary management tools offered by TCT (contact me on the email link below for a reprint of the December 2013 Dollars and Sense).

I want to emphasize that TCT’s services utilize stochastic approaches statistically validated methods to provide credit union managers a clear view of impending risks (and actions necessary to mitigate those risks) in a credit union’s:

  • loan portfolios;
  • interest margin management practices;
  • asset liability management practices;
  • delinquent loan management results;
  • short and long term strategic plans;
  • ALLL placement practices;
  • concentration risk policies; and
  • policies and procedures in general.

On numerous occasions federal and state examiners have expressed their confidence in TCT’s management tools and their contribution toward managing the risks inherent in running credit unions.

It is a proven fact: credit unions utilizing TCT management tools experience significant improvements in profitability and equity. This is accomplished through effective risk management.

I encourage credit union executives to contact me. Let me show how TCT can provide the management tools, advice, and processes to assure compliance with NCUA’s expectations in relation to Enterprise Risk Management.

About the Author
Dennis Child

Dennis Child is a 40 year veteran credit union CEO recently retired. He has been associated with TCT for 25 years. Today, Dennis enjoys providing solutions and training for credit union managers. He also uses his financial credentials and advisory skills to assist the Boomer generation plan and prepare for their retirement years. He and his wife, Geri, live in Logan, Utah. Dennis can be reached at