Financial Leadership: What Are Our Next Moves?
March 25, 2020
3 minute read – First, we want to thank the leadership of financial institutions all across the country for moving into action to temporarily ease immediate, and anticipated, financial burdens of members.
This type of immediate assistance helps the mindsets of members, employees, communities, boards, etc., and can help calm fears.
And the big steps some credit unions are taking to provide members temporary financial relief results in a material reduction of net income, in the short term. As we have said many times, the industry is well positioned to help.
As taxing as it can be for leaders, you must start thinking about your next moves. Following are some questions and considerations that augment our last discussion on living in a 0% rate environment.
It is not about getting the “right” answers to these questions, because in this situation there are no clear answers. It is about having the critical and strategic discussions before you are faced with these types of decisions. The questions do not need to be addressed in any particular order because these events and answers are multidimensional.
- What changes in membership needs should we anticipate and prepare for in the next 3 months, 6 months, and 12 months? What could be the financial implications for the credit union to meet these needs?
- If we continue to support our current financial relief actions, what other financial relief and/or support actions might we need to forego in the intermediate term? What are some creative ideas to be able to do it all?
- What are our qualitative and quantitative measures of success, and by what time frame? For example, what do we want to be able to say 3 months, 6 months, and 12 months out?
- How much in earnings and net worth are we willing to consciously invest in providing financial relief and support to our members over the next 30 days, 60 days, 90 days, 12 months, etc.?
- What consumer financial relief actions could the government enforce? What are creative options for us to consider ahead-of-time so that we can live up to these potential enforcements and continue to meet our members’ unique needs?
- How should we factor in anticipated and evolving changes to credit risk as we contemplate creative ideas to provide sustainable financial support and relief to our membership?
When helping decision-makers think through the considerations and questions above, they have found it helpful to use the following framework. They tell us it helps them to develop and prioritize their range of options for their next moves and provides a foundation for the many new questions and decisions they know will be coming at them daily.
- Keeping the strategic plan front and center as they are making decisions.
- Seeing, in real-time, the financial results and risk profiles as ideas are being discussed. This again helps to provide focus and prioritization.
- As uncertain as it is, it is important think about the next 3-5 years now, and consider how the decisions you may be faced with will affect the credit union financially. It is better to understand the implications – positive and negative – ahead of time and make the decisions with eyes wide open. People’s memories can be short, so document the rationale.
- Use stories to create scenarios of what life could be like in specified time frames. Make sure to have a range of outcomes. Create positive outcomes from bad cases. In times like these it can be easy to just think about the dark side. Don’t let that happen.
Remember, you can make a difference with your mindset. Times of great uncertainty present opportunities for your institution to contribute in a meaningful way to the well-being of your members, employees, and community. Approach these issues with a determination to make a real difference.
Call us. We are here to help you think and explore options. We have experience working with over 600 financial institutions, including 25% of the credit unions over $100 million in assets and 50% of the credit unions over $1 billion in assets.
We can appreciate how recent events are impacting the normal course of business and are happy to schedule time outside of normal business hours – early in the morning, late at night, or on the weekend, as needed.
You can reach us at 800.238.7475 | 602.840.0606 or email email@example.com.