602-840-0606
Toll-Free: 800-238-7475
contact@cmyers.com
602-840-0606
Toll-Free: 800-238-7475
contact@cmyers.com
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Project Management Tip #4: The Dependencies
Process Improvement, Strategic Implementation Blog PostsWhen building a project plan, the timeline and budget will require close attention to the dependencies in the plan, and how they can affect the success of the project. For instance, a project to implement new software could be dependent on first ordering hardware and waiting for it to arrive, or the successful testing of the software to validate that the project goals are being met. Every time a task has dependencies for completion, the timing to complete those dependencies must be factored into the plan. When figuring out how much completion time to assign for a dependency, try to factor in the variables that are not in the credit union’s control, and how they could impact the project’s timing and budget.
Key Business Questions
ALM, Strategic Planning Blog PostsWhen credit unions evaluate changes in strategy or financial structure, the focus from an A/LM perspective is often on valuation and net interest margin. However, these traditional approaches to measuring risk will not answer several critical business questions. Consider, does NEV or net interest income analysis allow a credit union to see:
Project Closure: The Handoff to Process Improvement
Process Improvement, Strategic Implementation Blog PostsIt is true that projects, by definition, have a definitive end. Planning for development and implementation is painstaking. Test cases are created and tried, there are usually at least a few bumps in the road but finally a project manager reaches the “go-live” date for the product, service or other initiative and, boom—the project is completed.
However, effective businesses don’t leave completed project outcomes “on the shelf” to collect dust. An important component of process excellence is reevaluation of completed initiatives by way of process improvement. In the initial stages of project management, key objectives for the project are defined and project managers get agreement from stakeholders that the project will meet the stated objectives. However, evolving consumer behavior and other changes in the economic and competitive landscape will always change the definition of success and will inevitably alter how effective old initiatives are for meeting current objectives. As such, it can be helpful to go back to the basic concepts of process improvement:
The moral of the story is a simple one: If a project is initiated and completed—but the process outcome no longer meets its intended objectives—it’s time to reevaluate the process.
A successfully implemented and completed project does not guarantee ongoing success. Continuing to monitor the performance against objectives will be critical. Too often businesses will leave established products, services, and processes on autopilot—which could be wasting valuable resources and potentially causing lost opportunities and/or revenue.
Project Management Tip #25: Beware the Yes Men
Strategic Implementation Blog PostsIf you hear “yes” a good deal—beware! You might be surrounded by the notorious “yes men.” It is hard for some project managers to ask resources for help, and then when they do they are relieved to hear those resources say “yes” they can complete tasks for a project. The problem arises if these resources are saying yes to all the other unrelated tasks that are also being offered to them throughout the day. When resources say yes too often, they become a risk for putting the project in jeopardy. “Yes men” often agree to things, in hopes of being people pleasers. They are not doing it to cause headaches, and they might not realize they are doing it at the time. When these “yes men” resources take on too much, there are a limited number of outcomes that could occur, and none of them are good:
Each of these outcomes has the very real potential of causing a domino effect.
For big projects that require many tasks make sure that, as the project manager, you are vetting the “yes” you receive with proof that your resources can truly handle their workload. This might require courageous conversations and, sometimes, a shift in the credit union’s culture.
Betas – An Unintended Consequence of Simplifying Pricing Assumptions
ALM, Interest Rate Risk Blog PostsNon-maturity deposits (NMDs) and their treatment in A/LM modeling is often a hot-button topic with examiners and management teams. While there are key risk characteristics of NMDs not addressed with many methodologies (see previous blog entries below), the topic of this blog concerns NMD pricing assumptions.
Pricing assumptions for NMDs can be called by many names – derived rates, betas, rate sensitivity factors (RSFs), etc. However, regardless of the name, the objective is to generate a model assumption for NMD pricing in a given interest rate environment.
Pricing betas assume that the credit union will adjust non-maturity share pricing based upon some percentage of the overall movement in prevailing market rates (often indexing to short-term rates). While the methodology and approach may seem sophisticated, the implementation of such an approach reduces the flexibility of A/LM models to address changes in pricing strategy for the current rate environment and automatically results in assumption changes for rising rate environments. For example, consider running a what-if through an A/LM model adjusting today’s share pricing strategy:
The unintended consequence of pricing betas results in a lower share rate in changing rate environments, as outlined below:
In the above example with a 45%beta on money markets, the +300 basis point (bp) rate is 0.15% less than the base case assumption for the same rate environment. Was the intention of running the what-if to test a 0.15% reduction in money market rates today, or was the intention to carry that same reduction in rates through all rate environments simulated?
Utilizing a prescribed pricing strategy, such as derived rates, allows management teams to develop a pricing assumption based upon the level of prevailing market rates – and does not result in unintended assumptions changes in key rising rate environments. If your model does not have derived rates capabilities, then the model should be re-calibrated frequently – minimally with each change in current pricing levels. Having derived rates capabilities adds control over model assumptions in risk limit rate environments and also can give management teams confidence that they are testing the impact of changing share rates today without automatically adjusting share rates in simulated rising or shocked interest rate environments.