By David Reed
One of the many paradoxes in running a successful financial institution deals with risk. Regulators view risk as the enemy of safety and soundness; credit union leaders view risk as a natural part of doing business. As a director, one of your challenges is discovering the right risk balance that will allow your organization to thrive.
Risk is the playing field we occupy, and we have to play the game by the rules, but also play to win. Ask yourself: is your credit union going to be relevant to your members in five years? A half a decade ago, a lot of credit unions answered this question incorrectly because they are no longer here.
Even in such a restrictive, competitive environment, countless opportunities are still available. Changing membership demographics, demand for loans and evolution in technology are but a few avenues to exploit to grow the business.
- Is your membership aging? The average age of credit union members is approaching 50. At this life stage, borrowing tends to decrease while savings increases. Do you have a plan for attracting a new generation of borrowers, who will help maintain solid interest margins?
- Are you ready to assess and manage the risks of re-entering the lending arena? With all lending facets now highly regulated, with further restrictions kicking in next year, preparedness is paramount.
- Technology that allows members to join, open accounts and borrow remotely is the minimum threshold for admission into the wallets of tech-savvy members. Are you keeping pace with the marketplace?
Unfortunately, some of the tight regulatory restrictions make it difficult to fully capitalize on these and other opportunities. As an industry, we need to keep telling the credit union story to our regulators and prove we are managing risk in an effective way. We need to find ways to work within the rules of the game to deliver the products and services our members need most.
Being a credit union director is a time-honored tradition of service. It is getting more difficult, but not unmanageable and not impossible. No one ever said it would be easy, but it is worth it.
David Reed is a partner at Reed and Jolly, PLLC and the founder of CU Doctor.
Join Reed as he guides credit union directors through the complex regulatory environment that impacts every element of credit union operations at the upcoming Director Risk and Compliance Seminar, Sept. 9-10, in Vancouver, British Columbia.
