WASHINGTON — A panel of corporate credit unions during NCUA Vice Chairman Rodney Hood's Jan. 11 Risk Mitigation Summit advised attendees that everyone must be involved in enterprise risk management for it to work.
Missouri Corporate Credit Union has numerous checks and balances in place from daily liquidity tracking to a whistleblower policy to help managing its risk. "We still have a Credit Analysis Committee and that's a big help," President/CEO Dennis DeGroodt said.
The corporate recently won the Missouri Quality Award relating to risk management. DeGroodt explained that the criteria for the award really forces you to look at how much risk you are willing to take and how you will manage it.
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Additionally, Missouri Corporate's Supervisory Committee developed a matrix of responsibilities, using best practices and Sarbanes-Oxley as a guide. It also developed a detailed internal audit schedule, as well as employing external auditors.
"It all goes to risk management," DeGroodt explained, "and it's about the culture of the organization."
As to culture, WesCorp Executive Vice President/Chief Investment Officer Bob Burrell said asset/liability management–not in terms of accounting, but regarding enterprise risk management–it must be top of mind with everyone in the organization. "For an ALM to be successful, everyone really needs to be involved," he commented.
It also must be tailored to that particular organization. "Obviously staff and analytics need to be in line with the credit union," Burrell stated. The institution must evaluate and understand its appetite for risk as well as ensure that the benefit is worth the risk.
Members United Corporate Chief Risk Officer Larry Harmon agreed, "The more complex your balance sheet, the more dynamic your program needs to be." The key is to test for catastrophic circumstances, but still integrating the basic policies and procedures in the day-to-day occurrences.
Harmon said he sees five key categories of risk: interest rate risk, net interest income risk, liquidity risk, operations risk, and regulation/legal risk. Of this last item, he said, "In today's environment, it's probably the biggest risk we face each day."
Some institutions falsely believe that once the tools are in place, it is done. In reality, Harmon said, risk management and re-evaluation and testing are never complete.
WesCorp's Burrell outlined that corporate credit unions use a variety of risk mitigation tools that can apply to others including ALM consulting, investment advisory services, customized investments, term and structured loans, loan participations, securitization, and others. –[email protected]
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