It's a new year and amid all ofthe uncertainty that will shape economic and business conditionsfor 2014, including the timing and magnitude of a potential rise ininterest rates, credit unions can still attain peak performance. Todo so, they need to resolve to get back to basics and re-evaluateor at least validate their business strategy. Credit unions need tobe able to evaluate their options, perhaps quite frequently. Theyalso need to constantly monitor and analyze their performance ifthey expect to successfully execute their business plan.

The credit unions that will be successful in the face ofuncertain conditions are those that plan for their impact, to theextent that they can, monitor the results of their plans, and actbased on an analysis of their ongoing performance. Asset-liabilitymanagement can help, by providing credit unions with a realunderstanding of what is taking place on their balance sheets. ALMalso helps to ensure that credit unions are proactively managingtheir balance sheets in the context of their business strategy.

Asset-liability management involves the management of risk thatderives from changing interest-rate levels and the impact they canhave on earnings stream and value such as market risk, inclusive ofinterest rate risk. ALM also involves managing the risk thatinsufficient cash will be generated from either assets orliabilities to meet membership needs or to exploit unanticipatedbusiness opportunities or liquidity risk. In addition, ALM caninvolve managing the risk and impact of loans and investments notbeing repaid such as credit risk.

Credit unions should consider that their business strategy andits execution significantly influence the potential impact of theserisks. For this reason, ALM needs to be considered in a broadercontext. That context is a discipline known as enterpriseperformance management. EPM frames the condition, risks andprospects of a credit union by linking the elements needed to plan,monitor and manage the execution of business strategy. On a microlevel, EPM, and the orchestration of strategy, take the form oftactical activities such as setting goals and targets, forecastingand modeling, planning and budgeting, and monitoring, analyzing andreporting results. It's here that ALM informs and supports EPM.

Credit unions can also use ALM to help assess the financialviability of various business strategies, along with related risks.ALM should be employed as an integral part of businessplanning.

Don Shaurette is director of market intelligencefor financial and risk management solutions at Fiserv. Hecan be reached at 678-475-5389 or [email protected].