Is Your Board an 'Enterprise Risk'?

As we all journey deeper into our literacy about and implementation of enterprise risk management, there appears to be one large risk credit union boards frequently miss: the risk that your board is not up to contemporary governance standards and ready for the future.

In a recent engagement I had, a CU board created and used a “governance risk” assessment to focus on what it wanted out of my development seminar. What might a governance risk assessment look like for your CU?

The common risks presented by a governance body are fairly obvious: fiduciary and financial capability to oversee a financial institution; adequate meetings and documentation of governance decision-making; attending to regulatory expectations and assessments; and establishing a team to manage board competence. In today’s highly regulated and changing risk environment, these appear to be ongoing developmental challenges for CUs, and areas where regulators are weighing in.

But there are other obvious risks your board might want to identify and assess. Here’s a sampler:

Board Composition and Development

• Might your board be complacent or stale due to lack of new members?  
• Are talented people interested in serving on your board or is it hard to find a qualified candidate?
• Does your board have a governance succession plan to identify and groom the next board members?
• Do you have one or two weaker board members who everyone appears to ignore because, after all, they are CU members and got on the board fair and square?  
• Does your board commit to an annual self-assessment process?
• Are there clear expectations and tracking of board member development investments?
• Does board development only occur when the locations are vacation destinations?
• Does your board avail itself of diverse governance development offerings or only those offered in the CU domain?
• Do board members receive less than 40 hours a year of governance development (corporate average)?
• Does your board have a line-item budget for development to be used by each board member?

Board Functioning

• Do your officers remain in place for years rather than refresh regularly?
• Is there a collaborative and respectful working relationship with the supervisory committee?
• Does your board have a “balanced scorecard” tracking metrics for (1) financial health, (2) member value and satisfaction, (3) organizational culture, and (4) community citizenship and planet stewardship?
• Are all board votes unanimous? (They shouldn’t be.)
• Are there clear performance expectations for directors and board officers?
• Are there at least two directors on each committee?

Future Thinking

• Is your strategic planning process dominated by the executive team, with minimal board input?
• Are your meetings dominated by management reporting or by strategic discussion?
• Does strategy discussion compose at least 50 percent of each meeting?
• Does your board think strategically by frequently challenging assumptions, services and product lifecycles, and benchmarking with innovative credit unions?
• Does your board track and regularly discuss innovations in the financial services marketplace?
• Does your board invite outside experts in to discuss strategic items, such as the business environment and innovation in the financial industry?
• Does your board retreat at least once a year to focus solely on strategic thinking?
• Does the CEO regularly excite your conversations by bringing innovative and leading-edge ideas to the table?
• Has your board had a “MAP” conversation: mergers, acquisitions and partnerships? Annually?

Enterprise Risk Management

• Does your board have a risk management education session each year?
• Has your board defined its “risk appetite”? Do board members review it at each planning retreat?
• Is there an annual “enterprise risk management” plan?
• Is there an internal ERM team? An ERM manager?
• Is your supervisory committee taking on greater ERM topics?

CEO Relationship

• Are you failing to provide adequate guidance and feedback to your CEO due to tardy or missing evaluations and processes?
• Do you have a CEO retention plan?
• Do you have a CEO and key executive succession plan?
• Do you have a sophisticated compensation-setting process?
• Does the board frequently interact with key executive team members other than the CEO at meetings?

Member Value and Satisfaction

• Does the board receive member satisfaction data at least quarterly?
• Does the board receive and discuss member value data at least twice a year?
• Does the board assure a robust member problem resolution process? Is the process tracked with metrics?
• Does your board track the Web and social media reputation of your CU?
• Does your board have a specific strategy for attracting younger members?

Les Wallace, Ph.D., the 9Minute Mentor, is president of Signature Resources Inc. He is co-author of A Legacy of 21st Century Leadership and author of Principles of 21st Century Governance.  He is a frequent speaker and consultant on leadership.

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