CAMAS, Wash. — Determined to examine risk from all angles, Lacamas Community CU here is looking for one risk management tool that "does it all," at a price the $175-million CU can swallow.
"I'm not aware of a single console tool that pulls all risk data together for the complex analysis we want to complete," said Ron Deming, director, information services at Lacamas Community (LCCU). "There's a gap out there in risk management that an enterprising software company could fill."
A comprehensive tool would compile information on a credit union's interest rate, credit, liquidity, operational and regulatory risk - all the standards that would be scrutinized as part of a regulatory exam, he said. Addressing the full spectrum of risk would also help LCCU determine the appropriate amount of net worth it needs, according to Dan LeClerc, CFO.
Instead of using a system built to deliver complete risk reports, Lacamas Community manually mines data and creates reports using two alternative tools: its core processing system and a profitability tool provided by Allen, Texas-based ProfitStars, a Jack Henry company, Deming explained.
"This is not a push-button approach," he said. "We have to pull the data from the core into the profitability tool. The time we spend is huge. It's a major drain on resources because we don't have designated analysts who can do the task."
And using the core and the profitability tool doesn't produce a comprehensive analysis, either. "The profitability tool does a lot, but it doesn't do it all," continued Deming. "It doesn't drill down far enough in some areas." For example, the profitability tool isn't precise enough to fully measure loan profitability, he said.
Precise tools exist, but they're expensive and they don't integrate with each other, he added. In order to create a satisfactory picture of LCCU's risk landscape, the CU would have to purchase several custom tools, he said. "And we don't have a lot of money to throw at this. So we piece things together as best we can."
The Credit Union Journal reported earlier this year that three large CUs seem happy with their risk management technologies, though they are distinct systems used only to analyze interest-rate or credit risk.
Wescom CU, for example, uses Cary, N.C.-based SAS for loan analytics at the portfolio level and Dallas-based Ser Technology for loan-level measurement, said Anna Mendez, chief credit officer at Wescom.
At a price of about $100,000 per year for SAS and SerTech, credit risk management is affordable even for smaller CUs, Mendez said.
However, Deming said he thinks that small CUs could only pay about $30,000 for "big-time tools" - and even precise tools such as SAS and SerTech don't consider the full spectrum of risk, he said. A business intelligence engine called Technology Navigator shows promise for LCCU, according to Deming. "It's a reporting tool that can be turned into a risk analysis tool." Offered by a Cary, N.C., company of the same name, the tool attempts to deliver custom reports and what-if scenarios from Harland Financial Solutions' UltraData Enterprise core processing system. A full-spectrum risk analysis could be delivered via Technology Navigator, according to the company's president, Todd Erickson.
