Compliance Blog

Written by Steve Van Beek

As I catch up on my summer reading......I've found some absolute gems - including this speech by Carolyn DuChene, the Deputy Comptroller for Operation Risk at the OCC. The speech talks about risk management and, especially, the importance of a risk culture at financial institutions:

"Every organization has a unique risk culture. You might think of it as the organization's 'DNA.' The risk culture consists of core values that drive business practices and that shape executive decision-making as well as employee actions...Risk culture is the navigational beacon by which the board, the officers, and the employees make sound decisions that are aligned with long-term strategy. It is the guiding light that helps each person take prudent actions knowing that he or she owns and is responsible for the results. When that beacon isn't working, an organization can lose direction and may chart the wrong course, entering markets and introducing new products without appropriate due diligence, or aggressively pursuing earnings and growth at 'any cost.' The navigational beacon can also guide appopriate risk taking and actively discourage inappropriate risk taking."

DuChene's speech goes on to discuss five elements of an institution's risk culture:

• Enterprise
• Ethics
• Education/Expertise
• Empowered and Engaged Employees
• Executive Expectations

The closing of the speech includes this:

"The establishment and cultivation of a risk culture is, in the end, all about good stewardship, and the recognition that a firm and its reputation prosper across the economic cycles when the human element is in sync with the risk management environment...Risk culture is an issue that is independent of size. In community banks, it can be the single most important element that guides them through economic cycles. Along with sound risk management and solid well-developed business strategies and capital plans, a healthy risk culture contributes to success. I believe banks that continually improve on these elements have a competitive advantage."

Of course, the speech was directed to a banking crowd - but the overall message applies to credit unions as well and I'd encourage you to read the full speech. 

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If you are interested in learning more - I'd encourage you to read my Three-Dimensional Compliance article from the May/June The Federal Credit Union and consider attending NAFCU's Regulatory Compliance Seminar where David Reed and Rusty Vellek will be discussing similar themes in their Featured Presentation: What Does Having a Culture of Compliance Mean for Your Credit Union?

NCCOs - Seminar is the perfect place to recertify your NCCO as you'll earn the full 24 credits.