c. myblog

July 24, 2014

Risk/Return Trade-Off—Part II

In last week’s blog, we discussed the need to understand risk/return trade-offs and the concern in relying solely on net economic value (NEV) for decision-making. If the objective is to decrease NEV volatility and your strategy under consideration is to A) Sell 30-year mortgages or B) Sell a 3-year bullet, does NEV fairly represent the […]

July 17, 2014

Risk/Return Trade-Off—Part I

Cliché? Yes. Often overlooked in decision-making? Also yes. This current long-lasting low rate environment has lulled some credit unions into ignoring the risk of things changing, such as an increase in rates. The focus on return without proper respect for potential risk has led to a material increase in interest rate risk in some institutions, […]

July 10, 2014

Concentration Risk in Non-Interest Income?

NCUA cited the Basel Committee on Banking Supervision when defining concentration risk in NCUA Supervisory Letter – Concentration Risk: “A risk concentration is any single exposure or group of exposures with the potential to produce losses large enough (relative to capital, total assets, or overall risk level) to threaten a financial institution’s health or ability […]

July 3, 2014

Is Your Risk Methodology Giving You a False Sense of Security?

A recent front page article in the Wall Street Journal caused quite a stir by claiming that credit unions are “piling into longer-term assets, exposing the firms to potentially significant losses if interest rates rise…” The objective of this blog is not to debate whether there is or is not too much interest rate risk […]

June 26, 2014

Don’t Take This Wrong: Being Lazy Is Not The Same As Being Efficient

A common process improvement tactic is to take a thorough look at current processes and analyze them for non-value add (NVA) activities. NVA activities usually meet one or more of the following criteria (all other activities are value-add): The activity has no customers, internal or external Customers/members are not willing to pay for it The […]

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