Reducing Risk and Growing a Credit Union in a Turbulent Market

man fastens seat belt on airplane
By Lynn Hess

3 minutes

Unlock new markets, forge strong partnerships and plan further in advance than ever.

World events over the last two years have prompted credit unions to work harder than ever to support their members through difficult times. Innovation sped up, remote working and interactions became the norm, and credit unions had to rethink many parts of their businesses.

The need for rapid adjustment in the face of change hasn’t stopped; on the contrary, the need for thoughtful strategic evolution continues to accelerate, particularly in the area of risk assessment and mitigation.

“It’s important for all financial institutions to keep a close watch on credit risk as we move forward,” says Rod Newcomer, corporate controller/senior director at State National Companies, a CUESolutions provider headquartered in Bedford, Texas.

At the same time, evolving risks are entering the playing field, such as rising inflation, cybersecurity and more.

“At the end of May, inflation was at 8.6%, the highest it’s been since 1981,” says Newcomer. “Cybersecurity threats like ransomware have also accelerated, especially as more people transitioned to remote work.”

Amid so many changes, there are opportunities for credit unions to mitigate these risks in ways that promote growth and more effectively serve members.

Managing Risk With Greater Accuracy and Unlocking New Markets

New and evolving risks mean that credit unions need to evaluate how they’re monitoring all areas of their business, which is why a robust enterprise risk management framework is critical.

“The workforce has become more distributed due to the work-from-home environment, and credit unions had to really think through that workflow and how pieces of information get processed,” says Trace Ledbetter, State National’s EVP/service. “And this is why it makes sense to have strong controls in place and ensure those controls remain effective in a distributed workforce.”

Emerging technologies can also play a role in more accurately accessing risk and unlocking new markets. Artificial intelligence, for example, may hold the key to helping credit unions better understand credit risk and giving more members access to credit services and products.

“Some organizations are experiencing good results with artificial intelligence, including fewer credit defaults and more approvals,” says Newcomer. “Four out of five Americans have never defaulted on a credit product, yet less than half have access to prime credit. In my mind, this is a potential market, and emerging technologies could help us more accurately understand credit risk.”

The Foundation Starts With Strong Partnerships

Strong partnerships will become more important as credit unions continue to navigate difficult market conditions. A good partner should have strong controls in place, robust compliance and the ability to stay nimble.

“Credit unions need to evaluate a partner’s financial strength and track record and understand if they can remain flexible during times of change,” says Ledbetter. “You need partners with a proven track record and an understanding of how to integrate current business processes to achieve best practices.”

Moving Forward With Greater Success

The compressed timelines for making changes and launching new technologies will have a ripple effect into the future. Credit unions will need to plan further in advance and operate under much tighter deadlines. At the same time, there are emerging opportunities around managing risk, promoting growth and providing member education.

“Member education has always been a focus for credit unions,” says Ledbetter. “And our credit union partners have members who have made really good financial decisions over the past 24 months in the face of uncertainty. There is an opportunity to serve as a resource and help those members continue to make strong decisions into the future.”

Lynn Hess is senior content and communications strategist at State National Companies, a CUESolutions provider in Bedford, Texas, where she writes on a variety of financial topics related to banking, credit unions, insurance and beyond. Her goal is to provide valuable and relevant information to clients, prospects and others in the industry and contribute to State National's thought leadership position.



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