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STRATEGIC PLANNING: Overarching Trends Will Stress-Test Every Credit Union’s 2016 Strategic and Operational Plans

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BY MARVIN C. UMHOLTZ

With 2016 less than a half year away, credit unions need to prepare themselves to have their strategic and operational plans stressed to the limits. See what impacts the Dodd-Frank Act’s supervisory, compliance and law enforcement risks will have on these plans in the upcoming year and beyond.

When determining the “management” component of the CAMEL rating (or CAMELS rating in some states), the National Credit Union Administration’s (NCUA) examiners, and the examiners from the state credit union regulatory agencies, include an assessment of each credit union’s strategic and operational plans.
CAMELS
C – Adequacy of Capital
A – Quality of Assets
M – Capability of Management
E – Quality and Level of Earnings
L – Adequacy of Liquidity
S – Sensitivity to Market Risk

Additionally, “strategic risk,” such as making adverse business decisions, improperly implementing a product line or lacking a response to industry changes, is similarly an integral part of the regulators’ risk-based examination. A credit union’s leaders are expected to understand the marketplace in which the institution operates and to integrate risk management with planning and decision-making.

In planning for 2016 and beyond, credit union management executives and members of the board of directors will find themselves especially stressed out, because those strategic and operational plans will be stretched to the point of snapping. This “strain on strategy” is due to the increasingly intrusive supervisory and rulemaking environment created by the passage of the hyper-partisan Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The Dodd-Frank Act’s supervisory, compliance and law enforcement risks have become dominant factors impacting upon a credit union’s strategic and operational plans. Through that ill-advised law, the federal regulators have usurped by fiat the role that should be the purview of a credit union’s board of directors and management team.

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