By Thomas A. Barstow
The leaders at Cobalt Credit Union diligently prepare for disasters, with a core team of workers meeting monthly to review plans. The Nebraska-based institution works the details and studies various ramifications, assuming a tornado might be the unknown menace that eventually could devastate its communities. But this spring, historic levels of rainfall and snowmelt brought flooding that dislodged homeowners, ruined businesses and wiped out large swaths of farmland in Nebraska and Iowa.
“These were areas that haven’t flooded in the past, and many didn’t have flood insurance,” says Gail DeBoer, CEO of Cobalt Credit Union. A bridge that was destroyed during the March storms only recently reopened. “Getting back to normal is really going to be a struggle.”
While they never really considered flooding as an event to anticipate, the credit union’s leaders determined that all their contingency planning laid the foundation for quick and effective action when members needed it most.
“For us, it is about being ready to serve our members at all times no matter the crisis or the situation,” DeBoer says.
That sentiment is echoed by experts who study disasters and how they can affect credit unions and their members. The key, they say, is planning. And then more planning. Tina Love, vice president of claims and recovery at Allied Solutions, says being ready to respond effectively to a disaster of any kind takes having a plan that is exhaustive yet not set in stone.
“Create and manage a ‘living’ [contingency] plan that allows for changes to be made before, during and after catastrophic events,” Love suggests. “Make sure that you continually update your plan at least on an annual basis.”
Get Ready for Anything
Several years ago, Cobalt Credit Union established a business contingency team whose focus is on disaster recovery planning to ensure its members have access to their financial products and services in the event of any kind of disaster. Fortunately, the credit union has “not had any really large-scale disasters to test our plan on,” DeBoer says. “However, that doesn’t stop us from testing our plan on a regular basis. We use something as simple as a brief power outage or system shutdown as an opportunity to go over our game plan as to what we would do if this had been a real disaster.”
Astute leaders also pay attention to what is happening in other communities nationwide and learn from others’ experiences, adapting their own plans accordingly.
“We take real disasters that might be occurring elsewhere and use them as a test for our own team,” DeBoer says. “You might think of it as a ‘what-if ’ drill.”
Michael Petrone, a risk management consultant with CUNA Mutual Group, and Carlos Molina, a CUNA Mutual Group senior risk management consultant, say that such modeling is important. Numerous scenarios should be considered, with new information and ideas routinely tested and added to the plans. They agree that credit union leaders don’t need to face a crisis to develop a plan — they just need to learn from others who have weathered storms or other crises.
“You want to make sure the plan is dustproof, and updated and tested,” Petrone says. “An untested plan is no plan at all.”
The Federal Emergency Management Agency notes that more than 20 percent of flood claims come from outside high-risk flood zones, which shows how people can be caught unprepared for various events. So far in 2019, disasters have ranged from fires in the West to tornadoes and flooding in the Midwest to severe storms and flooding in the East and South. And then there are the man-made crises. Credit unions will respond to a robbery much differently than they will to natural disasters, Petrone says. And the reaction to an active shooter will involve even more precise planning. Numerous details need to be considered, and the list of questions and potential answers should be reviewed and practiced.
“How do you barricade?” Petrone says, as an example. “Do the doors open in? Do the doors open out?”
Molina says one mistake is to think that a particular scenario won’t play out in your service area. “Tunnel vision is one of the biggest enemies,” he says. “You have to be flexible; you have to be open.”
Drill Down on the Basics
Several experts note that a lot of organizations try to think through the details but still need to look harder. For example, contingency plans often will include obvious communication tools, such as cellphones and the internet, understanding that landlines might be the first to go. But if electricity goes out completely, those options are short-term at best. Leaders would be well-served to include satellite phones or two-way radios in their plans, Petrone says.
Also, credit union employees are a critical component of an effective contingency plan, so understanding what their individual obligations are should be part of the process. The contingency plan for Jax Federal Credit Union in Jacksonville, Fla., took employees’ needs into account, and that knowledge came in handy when Hurricane Irma hit in 2017.
“We collected information from our employees on their family obligations — children, aging parents — and their evacuation plans,” says Mary Svoboda, JAXFCU chief operating officer and chief lending officer. “We also identified what evacuation zones employees lived in, so we were sure to excuse them from work in time to evacuate.”
JAXFCU employees were given time off in the days preceding the hurricane to go shopping for needed supplies, and a disaster recovery hotline was used to advise employees when it was safe to return to their branch or work area.
“After the hurricane we gave each associate a $50 gift card to help them replenish refrigerator items,” Svoboda says.
Several executives say their credit unions also understand the full power that social media can play in a crisis, and they advise employees accordingly. If workers are knowledgeable about how customers, emergency workers, news agencies and governments use social media during a disaster, then the credit union will be able to monitor shifts in situations in real time.
And it is important to have backups on top of backups. Petrone says credit unions should have multiple electronic copies of an updated disaster plan in several locations. And in case the power goes out, they should also have old-fashioned paper copies on hand.
Communicate Before, During and After
Love suggests credit unions work with their insurance tracking partner to immediately assess the exposure from a catastrophic event. “That way, you are working less tirelessly to play damage control,” she says. “Immediacy and responsiveness is the name of the game during hurricane season, wildfire season or when any other disaster hits.”
Networking in general can add a layer of sophistication to contingency plans, the experts say. Petrone and Molina note that a group of credit unions in Florida met after a hurricane and compared notes about what worked and what didn’t work. Afterward, each adapted their plans accordingly, knowing it would be only a matter of time before their customers and employees faced another crisis.
After Hurricane Irma hit, there was an extended time when internet connections were down, and the JAXFCU team has since added a backup service to their plan, Svoboda says.
JAXFCU revisits its plans annually, with its chief information officer in charge of what Svoboda calls a “team effort.” The credit union recognizes that some employees will have family obligations during disasters, which means they will not be able to report to work, Svoboda says, adding that it is important to identify who will be able to respond right away.
“We have an established calling tree to keep employees informed,” she says. And in addition to its disaster hotline, “emails, on-hold messages, Facebook, website banners and signs helped get the word out to our members.”
At Cobalt Credit Union, introspection has become routine. The business contingency team “has implemented processes and plans that we test monthly, quarterly and annually, depending on the team and the test,” DeBoer says. “Over the years, this team’s goal and our disaster recovery plan have evolved to meet the changes in our technology and the wider range of products and services we offer our members.”
This summer, the credit union unveiled a new customer-oriented tool of video banking. The idea is to give customers the option of video chatting with a credit union employee. The two-way video creates the personal connection that a lot of people want and the ability to share documents — but to do so from their home, office or anywhere in the world where there is internet access. The credit union realized it could be a powerful tool during a disaster, when a personal touch might help to calm unnerved customers, so the technology was added to the credit union’s disaster plan, DeBoer says.
Help Members Get By
Credit unions, at their core, are customer-oriented organizations, so they’ve learned to use various financial tools that will help people get through a crisis, including issues such as the federal government furloughs that meant paychecks were interrupted.
During the government shutdown that started late last year and extended into 2019, JAXFCU allowed its members who are federal government workers to skip loan or credit card payments for up to 60 days. It also allowed qualifying members to skip a mortgage payment for up to 30 days. And short-term, zero-percent loans were made available for the amount of a member’s paycheck up to a maximum of $3,000. Other standard services also were promoted, such as auto-loan refinance agreements for which payments were deferred for 90 days.
During Hurricane Irma, the credit union put in place other options to assist members, such as waiving a certain number of fees and offering loans both before and after the storm. It also offered members advice, Svoboda says, such as making sure they took out enough cash to weather the storm, while also ensuring that the ATMs were fully stocked.
Tom Kazar is a group vice president of sales at Franklin Madison, a Tennessee-based marketing firm that specializes in insurance products that are marketed under its clients’ brands. Kazar says credit unions can offer different insurance products for credit union members, including those that can secure the financial future of their families in a life-altering event. That can include products that offer supplemental income or other insurance solutions that provide asset protection. The basics such as life insurance, supplemental health policies and accidental death and dismemberment policies can be offered to credit union members well before a crisis hits, he says.
In the end, credit unions are about service to their members and to their communities.
“There have been events in the last few years that gave us pause to stop and look at how we assist our members who are suffering from national events or disasters like the recent flooding,” DeBoer says. “Being nimble and member-centric can allow you to react quickly to unforeseen disasters.”
Thomas A. Barstow is a Pennsylvania-based business journalist
This article was published in the November-December 2019 edition of The NAFCU Journal magazine. Want to receive The NAFCU Journal in your inbox? Update your email preferences.
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