Good Governance: A cautionary tale of risk management in this time of bank failures

While the news surrounding the failings and futures of Silicon Valley Bank and Signature Bank remains in the headlines, we are learning a great deal about the role that rising interest rates, cryptocurrency and governance played in each organization’s demise.

The federal government reacted quickly to minimize panic that might have destabilized the entire banking industry, and National Credit Union Association Chairman Todd Harper was quick to assuage the fears of our nation’s credit union members, saying “No one has ever lost a single penny of insured share deposits within the credit union system.”

And while there is much debate about who or what is ultimately at fault, there are important lessons to be learned from these examples about the risk management responsibilities inherent within your own credit union’s system of governance.

The International Organization for Standardization defines risk as “the effect of uncertainty on an objective”—a direct correlation to a credit union’s strategic plan. A secondary definition of risk is simply, “managing uncertainty.” This perspective brings front and center the human dynamics at play in measuring and managing risk.

 

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