Establishing risk tolerance in the face of COVID-19 ambiguity

Lead with compassionate values while leaning on analytics skill

Before a credit union can prudently determine how much support it can offer members during these challenging times, leaders must first step back and take the time to establish an adjusted risk tolerance. I’ll pause here for laughter, as we all know the rapid-fire changes to daily life brought on by the pandemic hardly allowed for the kind of thoughtful deliberations we’d have liked. Rather, the unprecedented circumstances that literally sprung up overnight, in many cases, called for bold, swift and decisive action.

Now, however, credit unions can allocate more time to strategic thinking about community support. With both snapshot and trending data, as well as qualitative insights from members and employees, leaders have more of the intelligence they need to establish an adjusted risk tolerance.

Creating a Net Worth Buffer

Every financial cooperative has a good understanding of the losses it is willing to withstand in normal circumstances, but today is nowhere near normal. Still, an established risk tolerance can serve as a good baseline. That’s because it was likely built by the same values-centric leaders who are working out a new plan for today’s members in need.

 

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