Performance Leads CUs to New Risk Management Tools
At one point in time, risk management was not as pressing as other operational concerns for credit unions. With the changing lending landscape, however, it has become priority No. 1 for many, particularly with regulators calling for more stringent monitoring.
Mike James, chief operating officer of Lending Insights, the flagship brand of CU Direct Corp., a vehicle lending and sales solutions provider, said risk management is among the top concerns credit unions are seeking guidance on these days. With that in mind, the CUSO recently launched a new range of consulting services to help credit unions better understand their lending programs, establish essential policies and procedures to meet regulatory requirements, and help advance their programs and improve overall lending performance.
Among the areas targeted are risk mitigation program development, loan profitability and pricing review by credit tier and lending peer comparison. Other areas include lending program and strategy development and underwriting effectiveness.
“Within the credit union industry, up until a few years ago, risk management was not a major topic. Community charters came into play when credit unions were mostly SEG-based,” James said. “The only real risk was people losing or quitting their jobs, or a company going out of business. Some of the members were not the loyal, SEG-based members anymore. And then credit unions started experiencing some of the major challenges happening at some banks.”
To help rebuild those ties, Lending Insight’s Lending Performance Management System aims to track performance and trends against a credit union’s goals, as well as provide branch management tools. The system also offers drill-down capabilities to assess performance by portfolio segments, and market intelligence tools to benchmark the credit union’s performance against other lenders.
James said if he had to pinpoint it, the biggest concern credit unions have lately is ensuring that they are in compliance with industry regulations. It’s critical to have an amiable relationship with the NCUA, state regulators and other oversight agencies, he pointed out. Static pool analysis and concentration risk, for instance, are two areas that have been front and center given the economic downturn and its recovery attempts, he said. So far, the feedback from regulators has been strong on CUSOs like CUDL that work to ensure everyone is on the same compliance page, James said he heard from a handful of credit union clients that recently underwent exams and all came back with glowing reports.
What has also helped is a series of free webcasts. According to Bill Meyers, communications coordinator at CUDL, sessions held over the past two weeks drew more than 150 credit unions. Lending Insights does up to 20 a year on topics ranging from strategies to shore up lending to regulatory compliance. James said CUDL also hosts free webcasts, adding he is also a frequent speaker at industry conferences where risk management continues to be a hot-button topic.
“Credit unions are asking, ‘How can we do a better job, where should we look and what do we need to know that we don’t know now?’” James said.