Credit Unions Need to Eye the Storm
Everyone in the area, including credit unions, either got out of town or battened down the hatches, preparing for what New Orleans Mayor Nagin called "the mother of all storms." Nearly 2 million people were evacuated from the area expected to feel the brunt of Gustav's fury.
Fortunately, Hurricane Gustav ended up being more of a windbag, though certainly there was damage done and CUs that were not operational. But the federal, state and local governments appeared to have learned their lesson from 2005's Hurricane Katrina, and so did credit unions.
Credit unions and their supporting organizations and regulators lived through the wrath of Katrina and, vowing never to do that again, got to work on greatly improving their disaster preparedness and business continuity plans. They were tested and retested, but there's nothing like the impending possibility of the real thing to really examine the plans.
As time passes, news will come out regarding what went wrong, whether at the federal, state or local level--whether generally or within the credit union community. Overall, from a bird's eye view, everything went remarkably smoothly.
NCUA, the Louisiana regulator and the local area credit union leagues were in close contact with the credit unions before, during and after the storm. Previously in Katrina, several credit unions could not be contacted and back up plans for credit union operations and documentation failed. Credit union officials sat in the back of pickups with shot guns and lock boxes as many of you will recall in order to serve their members. While valiant, this was a horrendous predicament to be in.
Immediately after Katrina, credit union matters were not always handled to the letter of the law in order to simply accomplish what needed to be done.
However, great lessons were learned in the weeks and months following that horrible situation, and while Gustav didn't prove to be the mother of all storms, I am certain there were more lessons learned this time around to even further improve disaster preparedness.
In preparation for Gustav, NCUA published on its Web site (www.ncua.gov) a listing of nearly 100 credit unions in the affected areas, their contact information and operational status. The federal agency also provided a link for the state regulators for CUs, banks and thrifts as well as a link to the National Weather Service.
The Louisiana Credit Union League posted disaster resources on its Web site (www.lcul.com). A credit union dial-in number was established for disaster alerts from the federal and state governments. The Mississippi Credit Union System provided regular news updates. The Texas Credit Union League offered a FEMA support center map and other important links at its Web site (http://www.tcul.coop/Disaster_Preparation.html).
One item I found of particular interest and thought would be highly valuable in disaster scenarios was a disaster prep check list from CUNA on the LCUL's site. It covered questions like: Should you increase your cash order from the Federal Reserve or your corporate credit union? Are there generators and will fuel be accessible? Do you have access to shared branches and how many ATMs do you own? The check list also included communications plans and other probing issues to consider.
My hope is that credit unions have asked themselves these questions over and over again during non-crisis times so that they don't need to be addressed under significant duress. Additionally, while the systems in the Gulf Coast seem to have been well-tested, credit unions anywhere can face disaster, or even just interruption, and should be equally well-prepared. Whether its wild fires or earthquakes out west, tornadoes in the Midwest or a simple branch fire or power outage, how will your credit union resume business? And, how will credit unions or leagues in non-distressed areas respond to disasters, if at all?
All of industry, including credit unions, has become highly dependent on electronics. Sometimes these can be the first to go in a storm, which is one of many reasons why back-up systems need to be in place. Safe-house credit unions that offer up their branches to share with the affected credit unions is just one of many ways credit unions demonstrate their difference.
I must say I was surprised though when NCUA recently said more than 100 credit unions are not on computers, which is actually up a good bit more than the agency said early this year. One has to wonder what will happen to these credit unions when disaster strikes. Electronic communication is fastest and most efficient when it's up and running. Not only might these credit unions receive alerts more slowly, but it seems to me it is also an added drain on NCUA and others' resources.
There is something to be said for the quaintness of a credit union run out of someone's kitchen or church basement, but computers seem a must in the 21st century. Credit union data can be stored by a third-party halfway across the country with the push of a button and regularly, and automatically, updated. Hopefully those hard copies of files are backed up far off-site somewhere. Maybe the credit union community should look as a whole into providing more grants or low-cost loans to their fellow credit unions that might want to upgrade from ledger book to Excel.
No doubt support of the credit union organizations and assistance from their regulators is crucial to business resumption in what could be chaos. At the time of this writing, CUNA did not have a report on whether its CULOCATE service (1-877-CULOCATE, or 1-877-285-6228) was implemented by any credit unions during Gustav. CULOCATE was launched after Katrina as a free service to all credit unions in disaster situations to leave a recorded message for their members to call in to regarding operating status and other pertinent information. However, the service seems an excellent idea in theory and offering it free to all credit unions, not just members, was wise and another demonstration of the credit union difference.
All are relieved that Gustav did not hit as hard as predicted, but maybe Hanna will turn out to be that mother of all storms. Be prepared.
--Comments? E-mail email@example.com