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Credit unions are known for their personalized financial services, not just for profit. But in recent years, they’re facing the increasing cost of compliance, specifically amid shrinking budgets. With annual regulatory changes and state laws, it can be a daunting task for credit unions to navigate the compliance landscape while keeping their costs in check. To remain competitive and compliant, they need to be strategic in their approach to confront and minimize these costs. That’s why in this blog post, we’ll discuss how credit unions can effectively deal with the rising cost of compliance amid shrinking budgets.
Conduct a Compliance Risk Assessment
The first step is to evaluate and identify the existing risks and compliance gaps within your organization. By conducting a compliance risk assessment, credit unions can detect and analyze areas that need improvement. This can help create an action plan to mitigate risks and keep compliance costs in check. Remember, a costly audit and potential fines or fees usually exceed the cost to proactively mitigate possible compliance issues. Implementing a risk management program can also ensure that you continue to keep up with industry standards and regulations, including cyber risk assessments that are widely expected and a must for financial institutions.
Develop a Compliance Budget
Whether we like them or not, compliance costs are a standard operating expense for credit unions, but proactive measures can help balance the budget. Before preparing your annual budget, identify and evaluate your compliance expenses. Consult with in-house experts and outside consultants to ensure that you’re within budget constraints and regulatory requirements. Ensure that you allocate enough time, personnel and resources to operate compliance functions, whether internal or outsourced. Budget planning can be arduous, but it’s necessary for all parts of the credit union’s operation.
Utilize Compliance Technology
Many credit unions still rely on manual compliance processes. Embracing digital technology can help improve compliance operations, minimize costs and strengthen member experiences. Automation can reduce compliance errors and aid in monitoring and reporting activities. Solutions like software-as-a-service can simplify compliance tasks and offer flexible solutions based on business size and complexity. This not only helps free up resources but also can improve the overall member experience through features like digital forms, real-time document management, data security and enhanced document search capabilities.
Foster a Culture of Compliance
To successfully maintain compliance standards, it’s important to create a culture of compliance within your credit union. Employees play a critical role in ensuring that your organization complies with regulatory requirements. Train and educate employees on current regulations and their roles as it relates to compliance functions. Communication is key, so share with your team updates, progress and such industry trends as cybersecurity initiatives and changing regulations. A well-rounded education program will encourage employees to have a heightened sense of awareness around compliance standards, reducing potential compliance violations—all while building a culture of trust and accountability.
Partner with Industry Leaders
Evolving regulatory compliance is an ongoing process that requires specialized services and knowledge for credit unions. Working with experienced industry consultants and third-party service providers can improve efficiency and reduce compliance costs. Keep in mind that compliance is complex, and working with experienced consultants can help guide you through the regulatory landscape. Identifying and partnering with service providers dedicated to helping credit unions can assist with audit support, compliance monitoring, regulatory reporting and other needs that may arise.
Credit unions are facing growing regulatory challenges while managing their costs. Many credit unions find the rising cost of compliance amid shrinking budgets to be a major concern. However, with the right approach, credit unions can manage the cost of compliance without sacrificing their commitment to their members.
By conducting a compliance risk assessment, developing a budget, utilizing compliance technology, fostering a culture of compliance and partnering with industry leaders, credit unions can maintain regulatory compliance within the budgetary constraints.
Ensuring compliance helps financial institutions attain their goal of providing trusted, high-quality financial services to their members, and builds a foundation of trust that inspires growth. Through consistent financial growth and strict regulatory compliance standards, credit unions can continue to thrive and provide steady returns for all members.
Lynx Technology Partners’ Director/Technology Risk Advisor, David Glaneman, CTPRP, has more than 25 years of IS and risk management services expertise. Lynx is a trusted partner in implementing governance, risk and compliance services that provide clients insight into what they cannot see, knowledge of what they do not know and solutions to their problems.