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Jul 05, 2016

How to know what to do when there are no clear rules

As I am likely dipping my toes (or a line) in Deep Creek Lake at this moment, I hope you don't mind if I dig deep into the archives to dust off an old blog post that still has merit. 

Back on March 7, 2010, I wrote about being "off the grid" for the NAFCU Compliance Blog.  And while my last post dealt with "blowing up" old, dusty things to start anew, I'm making an exception here.  

As managers, we often live off the grid.  We must make decisions without clear guidance, direction, or data.  So, how do we do this?  Here's a possible way of looking at that issue.  I've updated the post, but it remains very close to the original.

Enjoy.

***

When you grapple with an issue, it is very wise to find "the grid."  This is the known universe of law, regulation or guidance that can help you find an answer to your quest.  For example, if you are considering whether to discipline an employee, the grid would include the following:
  • Your employee handbook
  • A discussion with your HR manager to discuss possible discrimination issues
  • A thorough review of your file, communications, emails, etc., regarding the issue
  • Your HR manager may review EEOC regulations, guidance, or may find it appropriate to reach out to in-house or outside counsel
  • You may wish to consider whether similar situations occurred in the past, or if similar situations are taking place in other divisions at the same time  
Now that you  have the grid, start pouring through the information.  There's a potential issue that you must consider.  You may find that your research takes you off the grid.  There isn't a clear answer to every question.  Regulators, courts, and outside consultants do not provide information that addresses every conceivable situation.  Like I said, you'll often have a question that is not answered on the grid.
 

So, what do you do?  Here are some possible solutions.

  1. Plow ahead blindly.  Can you do this or that?  There's no answer, so just go ahead and do it. This solution is very simple, and it does allow processes to move ahead quickly.  However, it doesn't measure the risk of a given situation.  You can use this method and get away with it. But should a problem pop up (lawsuit), you may have to unwind a decision in a very costly way.
  2. Hit the brakes.  Can you do this or that?  There's no answer, so let's shy away from the potential risk. This solution is also simple, and it protects you from risk.  However, it doesn't measure risk, and it may keep you from implementing viable solutions that can help your members and your bottom line.  You'll never get burned using this system.  If you don't cross the street, you won't get hit by a horse and buggy.  But you won't get to the other side either. 
  3. Control the risk.  There are a number of ways to do this.  If a given situation has no clear guidance, take a step back and think about risk in a global way.  Could the decision lead to a lawsuit?  Member complaints?  Disrupt operations?  Affect liquidity risk?  Reputation?  Strategic risk?  Does the decision merit a legal opinion from an attorney?  What does your examiner think? Your Regional Director?  Should you call someone at NCUA's General Counsel's office and chat about it?  Or hire an attorney to do any or all of the above?  Can you purchase insurance to protect you if the decision leads to problems?  Have other credit unions or managers gone down this path?  What happened?  This solution is not simple, but it does measure risk and allow management to make an informed decision.  Knowing the risk, you'll be better able to price the product, limit concentration risk, think about alternatives, etc.  
Which is the best solution?  That's a business decision for your credit union.  Only you'll know what's best.  Living off the grid can be disconcerting.  But once you have a methodology for handling those situations, you will learn to live with the uncertainty.

Have a great week, guys.

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