Choosing Survival or Growth during the Current Market Disruption: Management Lessons Learned from 3 Previous Crises
Choosing Survival or Growth during the Current Market Disruption:
Management Lessons Learned from 3 Previous Crises
The Coronavirus pandemic and its economic impact threatens credit unions with a once-in-a-decade (and perhaps once-in-a-generation) market disruption that also provides an unprecedented opportunity for them to grow assets, build brand, evolve digital capabilities, eliminate low value expenses and significantly improve service to their members, during a period when competitors are most likely to be pulling back.
In many respects, the Coronavirus crisis is similar to other unexpected catastrophes – such as the 9/11 terrorist attacks, Super Storm Sandy, and other regional natural disasters. However, the current pandemic will also precipitate significant international economic disruption, similar to the Great Recession.
If the history of past economic disruptions serves as a guide, many credit unions are likely to react to the current crisis in one of the following ways:
- Denial – “The virus isn’t that disruptive to the world economy.” or “The market will bounce back in short order.”
- Fear – “We need to hunker down, and pause all decision-making until the crisis is over.”
- Defiance – “There’s no need to change anything. We’ll just proceed as though things are normal.”
Based on my experience as CEO of Bethpage Federal Credit Union during three major market disruptions – including 9/11, Super Storm Sandy and the Great Recession – I know that adoption of any one of those three strategic approaches to the current crisis by a credit union is a recipe for failure. I also know that taking a confident, pro-active approach during a major market disruption can succeed: our team at Bethpage drove annual growth by more than 20% in each of the years following those three historic events.
Here are snapshots of the course of action we followed for each disruption:
The 9/11 Terrorist Attacks – 9/11 was an international event, but it was primarily a New York disaster that affected nearly every family in Bethpage’s membership in some form. Every member knew someone who had perished in the twin towers. Our nation was also facing the prospect of a world war and the significant economic consequences of fear and recession. The Dow Jones Industrial Average dropped by 38%, the Federal Reserve cut rates, and the nation went into recession.
Bethpage reacted by helping members with refinanced mortgages, low rate home equities and auto loans, and by ensuring that each member knew we were there for them. As other institutions pulled back, we stepped up.
We met regularly as a team, acknowledged the personal and economic disruptions, created a realistic assessment of the opportunities, and acted aggressively to address those risks and potential rewards. Bethpage established special programs to help teammates and members, and made a commitment to not back off our plan to grow by 13.5% per year. While many competitors were pulling back during this period, we used capital and invested in growth. By focusing the entire organization on the opportunities to build our mortgage business, and to serve the members, Bethpage not only grew by more than 20%, it created record breaking return on assets.
Super Storm Sandy – This destructive storm caused 75% of Long Island residents to lose power for a week, and some households and business for more than two weeks. There was no gas; grocery stores didn’t have power; and everyone needed money. Bethpage went into full action. Immediately, we identified our teammate needs by booking hotel rooms, to ensure that they had housing. We ordered fuel for generators and set up warming stations for people to stay. We brought up systems for cash options (ATM, debit and credit). We removed loan payment requirements, supported every needy charity, and got our message out in every way we could. Bethpage’s decisive and comprehensive response to this community crisis greatly increased our brand exposure and member loyalty, and also improved our service numbers.
The Great Recession – Bethpage was holding its regular October strategic planning meeting when all hell broke loose in 2008. Financial markets were crashing, interest rates were dropping to record lows, and the public’s fear was rampant. The capital market system was close to collapse, as banking and credit union institutions went bust, and their losses were consuming....-->
Choosing Survival or Growth during the Current Market Disruption:
Management Lessons Learned from 3 Previous Crises
The Coronavirus pandemic and its economic impact threatens credit unions with a once-in-a-decade (and perhaps once-in-a-generation) market disruption that also provides an unprecedented opportunity for them to grow assets, build brand, evolve digital capabilities, eliminate low value expenses and significantly improve service to their members, during a period when competitors are most likely to be pulling back.