With many banks and credit unions starting their annual budget and planning process in the next month or two, it’s important to step back and look at the elements and detail contained within your institution’s overall Strategic Plan.
We reached out to noted industry expert, Marci Malzahn, on what areas are most critical for inclusion within the planning documents of financial institutions. “The strategies of successful institutions need to be dynamic tools that address questions such as ‘Where are we now?’, ‘Where do we want to be?’, ‘How do we get there?’ and ‘How do we measure our progress?'” These are obvious questions, but ones that must be addressed into the fabric of how a bank or credit union tackles both short and long term challenges and opportunities.
Most companies make the mistake of writing strategic plans to create a binder that subsequently sits on a shelf collecting dust for years until someone else comes along and begins the process anew. In industries like financial services, traditional players must now confront external disruptors and new technologies that threaten the prior foundation of their ongoing business model. Most successful institutions, however, have long understood that planning is an ongoing and ‘living’ process requiring constant review, care and feeding.
To that end, Marci articulates six critical steps that every institution must take its executives through to develop and maintain a dynamic strategy that can keep the firm focused on making the right decisions for navigating industry challenges and opportunities that lie ahead. Marci has found that your strategic plan should cover:
- At least a 3-year period, with annual rolling updates
- Comprehensive assessment of risks, especially Enterprise Risks (ERM)
- Articulate and map to an overall mission statement
- State strategic objectives and how you plan to achieve them
- Explain how you will update risk governance
- Review, update and approve changes as risk profile changes
Tackling these areas with all of your team leaders can help your bank or credit union ensure that the strategic plan you fashion is one that is not only dynamic and reactive to the current challenges, but also is well understood by all stakeholders in your company.
Marci will cover these elements in much more detail, along with many other critical action items associated with Strategic Planning in her July 18 webinar entitled “Strategic Planning for Financial Institutions – It’s ALL about Your Strategy“. Check it out and sign up today.
Businesses, as well as the industries in which they operate, go through 4 distinct cycles of expansion and contraction. Understanding these stages can be crucial for lenders to understand the borrowing needs, abilities and risks of their business customers.
Dev Strischeck, Principal of Devron Risk Advisory and former Sr. Credit Policy Officer, lays out a clear description of these four stages in his webinar on “Industry and Management Evaluation”. Dev summarizes these four business (or industry) cycles as follows:
- Early Expansion (or Recovery), where borrowers seek funds and capital to support sales growth and new ventures
- Late Expansion (or Boom), when companies need funding to continue sales initiatives and expanding capacity
- Early Contraction (or Slowdown), requiring borrowers to fill aging accounts receivables and slowing inventory turnover
- Late Contraction (or Recession), forcing businesses to borrow to meet fixed outlays, slow collections and losses as well as liquidation
The astute lender knows that it takes more than just analyzing individual borrowers, but also requires an careful understanding of where the industry in which a company operates falls within a cycle. Industries in decline will overtake an otherwise strong individual company if that business lacks a strategy and direction for hedging its exposure by expanding into new industries. Unfortunately, many lenders lack the knowledge or resources for analyzing borrowers’ ability to repay debt based on both the business performance and the industry’s life cycle.
Dev will cover these critical tools for managing borrower risk in his upcoming webinar “Industry and Management Credit Evaluation“, July 20 from 2:00 – 3:00 pm ET.
Banks, especially smaller Regional and Community institutions, along with Credit Unions, are facing continued pressure to both retain and attract new deposits as pressure from larger institutions as well as non-banking players and investment firms continues to grow. Charles Wendel, Founder of Financial Institutions Consulting, recommends that banks and credit unions develop a ‘Deposit Growth Checklist’ to focus efforts on increasing deposit share in this market. Putting someone in charge of deposits ranks as the top item in Charles’ checklist. “This is the person who goes to bed and wakes up every day thinking about ways to grow the institution’s deposits,” he goes on to say. Focusing all retail and business bankers on deposit generation as part of their foundational job description is also at the top of the checklist. Charles also believes that management needs to cover open issues as part of the bank’s deposit building initiative. This would include general areas of concern such as Market Positioning, Sales Responsibilities, Channel Management, and Pricing Strategies.
Join Charles Wendel May 23rd (12:00 ET) as he goes through these critical recommendations and insights in his webinar, “Growing Deposits in a Competitive Banking Environment“.