CFO Focus: A 7-step guide to creating a dynamic ALCO

first_imgFollowing the financial crisis, the importance of having a prudent asset/liability management committee in place became abundantly clear. The Fed’s recent emergency rate cut in response to the coronavirus’s risk to the economy has many ALCO committees across the country ramping up efforts to support their credit unions’ performance. The event has highlighted the importance of creating a proactive—versus a reactive—committee.  In the long term, credit unions will benefit from transforming their ALCOs from backward-looking, reporting-focused cost centers into dynamic, outcome-based committees that inform profitable decision-making.Comprised of key decision-makers, ALCO members often include board members, the credit union’s president or CEO, the chief financial officer, the head of compliance, and other senior team members, ALCOs are often viewed as a check-the-box regulatory requirement, responsible for overseeing balance sheet risk management. By implementing the seven steps below, credit unions can shift their ALCOs from cost centers to a catalyst for growth and profitability.Step 1: Review capital planningKeeping the right level of capital at a credit union requires building a balance among growth, risk, and return. Credit union boards and ALCOs must actively assess risks and hold capital levels commensurate to those risks. The first step in supporting a dynamic ALCO is for the board and senior management to review your credit union’s capital planning process. Does it combine the credit union’s strategic planning goals with its market opportunities to arrive at planned growth, earnings and capital levels? Is the board assessing potential risks within the plan to ensure it has held enough of a buffer to withstand unforeseen changes? continue reading » ShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img