Corporate One Enters Enterprise Wide Risk Management Realm; Aims to Help Credit Unions Change the Way They Think About Risk
COLUMBUS, Ohio -- When it comes to building a successful business Corporate One has done it over and over again.
Whether it was creating one of the most successful corporate credit union-owned CUSOs in Primary Financial which offered a brokered CD or creating Alliance One, a popular non-network-specific surcharge-free ATM network, Corporate One has an eye for filling credit union needs.
This time around Corporate One is focusing on risk--enterprise wide risk management (EWRM) that is. The corporate has launched CU Risk Manager, designed to assess risk enterprise wide. But it's much more than that, said Corporate One CEO Lee Butke. It's a tool to get credit unions thinking about their goals and strategies and assessing where the risk is and how it will affect achieving those goals.
"We see so many credit unions adopting new products and services. They need to keep up with the impact of these changes," said Butke, noting that credit unions are launching new products to meet member need and keep up in the marketplace, but they must keep risk in mind.
If a credit union adds indirect lending, is it assessing the correct things to ensure the program is launched in an efficient, effective way that mitigates risk, asked Corporate One Vice President of Risk Management Joseph Ghammashi. He said Corporate One's new EWRM solution set will create templates that credit unions can utilize when launching new products like indirect lending. These templates will be built around best practices, ensuring the credit union is asking the right questions of the vendors and dealers involved with indirect lending. These best practices will come from the participating credit unions in CU Risk Manager and be hosted on a database at Corporate One. Ghammashi said the templates will continually evolve as more credit unions contribute.
"We think the evolution of financial institutions, with Sarbanes-Oxley and risk-based capital, all of these kinds of things have tightened the focus on operational risk. It was first picked up by the OCC and FDIC. It makes good sense to look at operational risk, not just credit risk and market risk. If you look at bank failures, they haven't been because of credit risk, but operational risk," said Ghammashi. Credit unions are attempting to add risk-based capital through the Credit Union Regulatory Improvements Act.
CU Risk Manager will feature LogicERM, software credit unions use to capture data from internal risk assessments. Corporate One will work with credit unions to implement the LogicERM software to represent their organizational structure, processes and methodology, and then assess risk and prioritize risk management.
Butke said risk isn't bad, but it's bad if credit unions don't know where the risk lies. Taking risk may be a key part of a credit union's strategy for reaching out to the underserved, for example, but they must understand the risks.
The Centrix failure is a good example of how solid EWRM can help credit unions avoid problems. Butke said CU Risk Manager ensures credit unions are "tearing up" their vendors so to speak to look for any potential risks.
Compliance is of course rolled into EWRM said Ghammashi, but it's more than just a checklist. When credit unions hire outside vendors to check for BSA compliance, that's exactly what they are doing--going down a checklist to see that the CU is in compliance. Ghammashi said good EWRM brings more of that responsibility in-house; it is a way to get managers thinking more about risk and how each of their operations adds risk to the credit union.
Butke, who has been behind Corporate One's successful business ventures, believe EWRM is a good business to be in, but more importantly it's the right business to help its credit union members.