WASHINGTON — It’s a risky business – made riskier with NCUA oversight of the responsibility of directors in overseeing the risks faced by their credit unions.
That’s the one sentence summary of a well-attended GAC breakout session where three panelists tackled the issue of director responsibility in addressing the risks their credit unions face. They included John Christenson, a CUNA Mutual associate general counsel; John Wallace, a CUNA Mutual vice president; and David Reed, a lawyer and founder of CUDoctor, a consulting practice.
Kathy Thompson, a CUNA executive, moderated the Tuesday session.
Thompson set out one building block: “Just because you” - directors - “aren’t paid does not release you from legal responsibility.”
The other fact – agreed to by the panelists – is that risk is a necessity in credit union operation. It cannot be avoided.
But it can be managed, and that – stressed the panelists – is the job of management. Not directors.
The director job is more subtle, amounting to setting out guidelines determining acceptable risks and regularly checking in to ensure management is doing its job.
“The board needs to have an ongoing dialog with management around risk issues,” said Christenson.
Major categories of risk faced by credit unions, agreed the panelists, are fraud, litigation (including class action suits), third party risks (arising from actions by everybody from a CUSO to a core provider), and emerging interest rate risks.
That is a lot of risk, and a board needs to know that NCUA examiners closely assess the preparedness of this particular credit union to deal with the risks it faces.
“Ask management to identify the key risks your credit union faces,” advised Wallace, “and also ask management to bring back to the board information that will help the board understand management’s response.”
Bottom line: the board cannot duck risk and there is a lot of it. Learning oversight of management is key to navigating these churning waters, said this panel.