CFO Focus: Analytics for strategic planning

It is well understood that, when formulating a strategic plan, members of the executive team set a future vision for the organization, enumerate the strategic and financial goals that they wish to achieve, and specify the strategies and initiatives needed to achieve those goals. To help illuminate strategic issues, certain basic, cost-effective data analytics should be performed as part of the plan development.

The key is to incorporate simple but powerful analytics that provide meaningful and actionable information on the major components of a credit union’s operations. Importantly, these analytics do not require sophisticated algorithms nor place excessive burdens on IT resources. Further, this data can be augmented with industry benchmarks and market demographics that can be readily obtained from third-party providers.

The following small-data analytics will help shed light on crucial business questions and develop effective strategies.

1. Financial Performance Analytics. Many credit union executives use peer group financial data to compare performance against peers, set high-level financial targets, and establish contribution targets for individual business strategies and investments. However, the comparison must go beyond high-level performance measures such as return on assets or net interest margin. To be most effective, comparisons must also include performance drivers, such as deposit mix and growth, the composition of earning assets, operational efficiency metrics, and other key performance indicators. A separate comparison should also be made to a group of high performing companies. Case studies of selected high-performing credit unions can be developed to fully understand their business strategies, market focus, and operating environments.

 

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