Press
Online Discovery: Risk Inherent At All CUs– Big Or Small
NEWS RELEASE:
From CUNA Mutual Group Public Relations
www.cunamutual.com
For more information:
Phil Tschudy 608/231-7188 philip.tschudy@cunamutual.com
Rick Uhlmann 608/231-8940 rick.uhlmann@cunamutual.com
MADISON, Wis. – The future sustainability of small credit unions in today’s challenging economic environment will require improved decision making strategies, proficient and proactive risk assessment and more efficient execution of operational processes, a CUNA Mutual Group risk manager told Online Discovery Conference attendees Tuesday.
Risk can be managed effectively in all-sized credit unions, and smaller ones are not necessarily at a disadvantage, said Joette Colletts, regional manager of Credit Union Protection Risk Management.
“In fact, smaller credit unions have several advantages in managing risk. With fewer employees and close relationships, their culture readily promotes open communication and a willingness to share suggestions. This agile atmosphere lends itself well to reviewing, reevaluating and upgrading planning to promote a healthy risk culture,” Colletts said.
Credit unions must assume some risk to innovate and grow. That means having a culture that aligns risk with goals and properly managing the process to optimize return.
”Too little risk taking hinders innovation, which can threaten a credit union’s survival, while too much risk taking can be just as crippling by uncontrollably expending resources, leading to losses,” she added.
Colletts focused on two of the numerous challenges facing credit unions – employee dishonesty and vendor fraud.
Employee dishonesty does not discriminate or offer immunity between large and small credit unions, geography, employee tenure or past experience.
“The common denominator in my 27 years as a risk manager has been that the credit union either lacked the controls to help prevent the fraud from occurring in the first place, or became more relaxed about their controls over time. If you think you don’t need to implement controls or tighten existing controls, please think again. I assure you, you’re providing the ideal environment for a dishonest employee,” Colletts said.
Among the best practices for thwarting employee fraud include:
- Implementing dual control for currency shipments and cash replenishments
- Controlling access to data, information, checks, and cash
- Maintaining an active supervisory committee
- Conducting surprise audits, and
- Performing bondability verification and background checks
Third-party vendors play an increasingly important role in helping credit unions compete and expand member services. While outsourcing generally creates member value and improves the bottom line, it can create significant risk if due diligence is improperly performed when selecting and managing vendor relationships.
Understand a third-party’s organization, business model, financial health and program risks, she added. “Remember due diligence never stops. It’s an ongoing process.”
Colletts recommended implementing an Enterprise Risk Management (ERM) program to improve strategic decision making and risk communication. “ERM integrates risk management with strategic planning and is a systematic approach to managing all your credit union’s key risks. It maximizes member value by optimizing risk taking.”
ERM can be implemented in any size credit union and can be scaled down if needed and implemented in incremental steps.
A credit union’s board of directors is ultimately accountable for risk oversight, including the evaluation of current risks and identification of emerging risks. Boards should consistently discuss worst-case scenarios, engage in “What if?” discussions and develop a written risk oversight policy with the assistance of legal counsel
Online Discovery is CUNA Mutual’s Web-based equivalent of a face-to-face conference without the associated expenses or time away from the office. The free, virtual event attracted a national and international audience of more than 1,800 credit union and league staff. The conference’s future-focused content aims to help credit unions solve problems, face challenges and address opportunities.
CUNA Mutual Group insurance, retirement and investment products provide financial security and protection to credit unions and their members worldwide. With more than 75 years of true market commitment, CUNA Mutual’s vision is unwavering: To be a trusted business partner who delivers service excellence through customer-focused products and market-driven insight. More information on the company is available on the company’s Web site at www.cunamutual.com.
CUNA Mutual Group is the marketing name of CUNA Mutual Insurance Society, its affiliates and subsidiaries, including CUMIS Insurance Society, Inc. Product availability and features may vary by jurisdiction and are subject to actual policy language. Corporate headquarters are located in Madison, Wisconsin.