CFO's, recently attended the CFO Council Meeting in Seattle and
the CFO Forum, an extension of the Wescorp’s Economic Forum
in Pasedena. In all there were over 300 CFO’s at both meetings.
The topic with
the most session time at both conferences was interest rate risk
(IRR) management, net economic value (NEV) calculations and responding
to NCUA’s increased examination efforts in these areas. The
bottom line is that economic modeling will become a more important
activity, not because there has been a dramatic increase in risk,
but because NCUA is looking for more documentation.
Twice yearly
I meet with a group of consultants to share views and issues on
our work with credit unions. The number one topic at our Madison
meeting was the role of CUSO’s and how important they could
be to the future of credit unions. The following are some points
of view made by members of the group about CUSO and other topics:
- Managers
are conservative in their business planning because there is no
reward for going outside their comfort zone. Members don’t
have an equity reward either if the credit union does really well;
- CUSO’s
are raising issues never before seen by credit unions. These include
equity interests for management, new kinds of risks and getting
into new businesses. It may be easier to first merge CUSO’s
than it is to merge credit unions because the CUSO can reward
such initiatives easier;
- The CUSO
offers credit unions a choice of either getting into a business
or buying something from a vendor. The CUSO can put a credit union
in a different business environment, i.e. “Be in the market,
not a customer of it”;
- The rush
to embrace Internet solutions was a rush to try new business models—many
did not work;
- The credit
union’s sponsor relationship is valuable: E-trade just bought
the “rights” to be the financial service provider to
Oracle’s employee base;
- Retain mortgage-servicing
rights? Don’t do it unless you have an explicit program to
develop the relationships further. Servicing is selling for almost
7 times the annual fee, which is quite high by historical measures;
- The lead
product for a West Coast credit union is free ATM’s anywhere
in the world. Just e-mail the charge and the credit union will
rebate it;
- In the credit
union business model, the basic cost structure-built for transaction
processing- and the profit (revenue) drivers are not linked;
- The value
of e-statements is that they set up an email marketing opportunity.
Easiest way to start this program.