A Strategic Guide for New Board Members

The path from appointment to impact isn't simply about occupying a seat; it requires strategic intention and deliberate action. Effective board governance has never been more critical. With board turnover accelerating across organizations and regulatory pressure growing, the need for directors who can quickly adapt and contribute has intensified. New members face mounting expectations to demonstrate value while navigating complex regulatory environments and stakeholder demands. 

This guide offers practical insights and critical questions for new board members to meaningfully contribute from day one while building toward long-term effectiveness. Whether you're a first-time director or joining a new board, these insights will help you navigate the critical first year and establish yourself as a valued contributor to organizational governance. 

What is my role?

As a member of a credit union board, your mission is to represent the interest of the credit union’s members. This happens through providing strategic oversight, helping to set and monitor policy along with ensuring the institution’s long-term financial health and mission alignment. As a refresher, it might be helpful to review some of the main topics and ideas open for discussion by boards, particularly those that may be facing increased regulatory scrutiny. 

What is our current level of interest rate risk and how does that impact or tie into our strategic plan?

The most common methods to measure interest rate risk (IRR) are the Net Interest Income (NII) and Economic Value (NEV/EVE) simulations. Each has its strengths and weaknesses, but the combination of the two can provide a comprehensive perspective on both the short-term and long-term risk exposure driven by repricing and behavioral differences in an institution’s assets and liabilities. Elevated interest rate risk can dampen the institutions’ ability to continue forward with its long-term strategic plan while mitigation strategies are put in place. On the other hand, avoidance of interest rate risk can impact capital values and earnings in such a way that an institution cannot afford to strategically grow. Understanding the balance of managing risk and executing the institution’s long term strategic plan depends on your institution’s risk appetite. 

Unfortunately, there are countless examples in recent history of poor governance oversight of risk management practices. This includes scenarios in which risks are not fully understood or embraced. The credit union’s ALCO serves as the decision-making and monitoring body for asset liability management, framing strategic priorities with the balance sheet structure. However, it is up to the board to ensure that management's risk practices are in line with the institution’s overall strategy.

What strategies or tools does our institution have access to for managing and mitigating interest rate risk?

Credit unions are in the business of managing risk, not avoiding it. Therefore, it is very important for institutions to have an adequate tool belt that allows them to manage and mitigate risks overall. As far as interest rate risk goes, when an institution has an elevated risk position, one of the most effective tools for them to utilize is interest rate swaps. Swaps can hedge away a portion of longer duration, higher risk products on the balance sheet, or be used to synthetically extend your funding base. Another option to manage interest rate risk is to sell loans or reduce loan originations on products with longer durations, like fixed mortgages. This method, while it can help manage interest rate risk, can also come at a cost to the institution such as either selling these products at a major discount or losing out on membership growth opportunities when cutting origination volumes. 

These are just two examples to start the conversation regarding managing and mitigating interest rate risk within the credit union. 

What assumptions go into our modeling?

Understanding that any model output is only as good as its input, the assumptions in all models from IRR to liquidity need to be monitored and stress tested regularly. 

Management best practices typically include modeling potential interest rate fluctuations and providing those IRR analyses to ALCO for decisioning the best path forward to structure the balance sheet given the strategic plan. For example, if the strategy calls for increasing interest income earnings and longer-term member relationships, then ALCO is weighing the options based on the risk appetite.

Assumptions can be stress tested either on an annual or quarterly basis depending on their severity. Regular back tests can also help an institution determine if their assumptions accurately represent their institution’s performance. 

What is our current liquidity position?

Effective liquidity monitoring and management is crucial for credit unions to meet their financial obligations and support member needs. Much like interest rate risk, liquidity risk must be continuously monitored—not only to support the institution's strategic plan and daily operations but also to prevent excess liquidity from weighing on financial performance. When thinking about a credit union’s current liquidity position, board members can ask: Can the institution meet withdrawal demands, fund loan requests, and manage unexpected financial stress? 

How has credit risk changed over time?

Credit risk is another key area for board members to actively discuss. For some organizations, minimizing credit risk may lead them to only grant loans to A paper borrowers. However, this may not serve your mission of making loans to more members. It may also lead to further margin compression as those with top-tier credit can easily shop around for the best rate. 

Financial institutions shouldn’t seek to avoid credit risk entirely. Rather, board members should be active in the conversation regarding how to appropriately price credit risk so that the institution can continue lending. 

As we know from the basics of finance, taking on more risk should result in more return. The same is said for credit risk. If an institution has the capacity to take on more credit risk and it is priced appropriately, then it should not be afraid of doing so. The main question to ask along these lines is: are we okay with additional credit risk if it comes with additional returns? 

As you progress through your board journey, consider immersing yourself in educational opportunities that address specific risk areas relevant to your institution's unique balance sheet and business model. Board effectiveness ultimately hinges on the continuous development of your governance expertise and your understanding of the evolving financial services landscape. 

By combining the strategic considerations outlined in this guide with targeted learning in areas most crucial to your organization, you'll move confidently from initial appointment to sustained impact. 

Remember that the most valuable board members are those who balance respectful collaboration with the courage to ask challenging questions when necessary. Your perspective is a vital asset—use it with intention, develop it with purpose, and apply it with the deliberate action that effective governance demands.

Peter Myers is SVP of CUESolutions provider and Advancing Women sponsor DDJ Myers, an ALM First company. DDJ Myers has been working with credit unions in a professional development capacity since 1989. The company has won awards for our innovative and impactful work across the country with organizations of all shapes and sizes. As part of its CEO succession planning process, executive search work, or strategy development and deployment programs, DDJ Myers deploys its organization alignment assessment, an instrument that provides stakeholders actionable insights about the organization’s strategic alignment and optimal readiness for future actions. The OAA has collected thousands of responses, so the data can now be considered across a variety of factors, including organization level, departments, tenure, race/ethnicity, and gender.

Thomas Griswold, CFA, Managing Director, Advisory Services, joined ALM First Financial Advisors in 2013. As the Managing Director for Advisory Services, Thomas oversees the Advisory Services team, which is responsible for developing holistic partnerships with clients and implementing effective balance sheet and 
investment strategies to enhance overall performance. This includes working closely with clients to interpret full balance sheet risk analytics and risk positioning to determine the best opportunities to achieve their financial goals. 

Thomas and his team coordinate internal collaboration to deliver analytics and timely reporting to assist clients throughout the entire process from strategy development through implementation and post-execution analysis. Advisors provide advice and insights on loan 
pricing, loan transactions, investment portfolio management, funding strategies, hedging and more. He also assists with interest rate hedging strategies and advises institutions in asset valuation to guide trading decisions. 

Prior to joining ALM First, he worked as an analyst underwriting commercial credits with PlainsCapital Bank. Thomas holds a bachelor's degree in finance from the University of Notre Dame, as well as the Chartered Financial Analyst (CFA) designation. He assists with Junior Achievement Dallas mentoring students on a variety of topics including sound financial planning and career guidance and planning.