MINNEAPOLIS - Credit union executives are being urged to take a long, deep look at how they are managing risk.
"Risk management has always been relevant to credit unions, but all of a sudden we're seeing big credit union with big losses, and the ability to manage risk at a much different level has become paramount," said Wade Painter, managing director of credit union consulting services at RSM McGladrey. "For a long time, credit unions have sort of managed risk intuitively, and that has worked, up to now. But it's not working so well right now." That's why some CUs are turning to Enterprise Risk Management (ERM). "It encompasses governance, the board of directors, the management team, and defining what each group's and person's role is in managing risk and then creating a risk management team," Painter suggested. "It's about creating a risk culture, so that employees understand the credit union's risk universe."
The first step is to figure out the credit union's risk response calibrated against its risk appetite, he explained. The biggest problem Painter sees is the continuation of risk management being just one person's responsibility, be it the CEO or the CFO. "There is no silver bullet, but there's also no one person who can do it all," he commented. "Risk can come at you from so many places."
While ERM and the whole notion of an holistic approach to risk, creating a risk culture and understanding the CU's risk universe sounds like some pie-in-the-sky, New Age approach to age-old issue, Painter emphasized that if ever it was more clear that risk is very real and very significant, it's right now. "ERM is real, it's not some ivory tower, high-concept thing," he said. "Credit unions must get their arms around risk, and we're talking about a best practice approach to doing just that. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com/ http://www.sourcemedia.com/
