The Daily Dividend

News, notes and insights from around the industry

AUGUST 15, 2018
Navigating a Crisis
By Mark Loehrke, Editor, Financial Managers Society

Navigating a CrisisIt may not exactly be hot off the presses, but a recent survey on crisis management from earlier this summer highlights several issues for organizations that can almost be considered evergreen. While global in nature – with respondents from 20 countries – the 2018 Crisis Management Survey from Deloitte nevertheless holds many universal truths for companies of all sizes, disciplines and geographic locations, including banks and credit unions. 

"Crisis management shouldn't start with a crisis – at this point it may already be too late," notes Peter Dent, Deloitte Global crisis management leader. "With the rapid pace of change facing companies worldwide, and with crises on the rise, it is critical for organizations to be ready to respond with skilled leadership and plans that have been tested and rehearsed."

Here are some the key findings from the survey for institutions to consider:

Crises are on the rise
Nearly 60% of survey respondents believe their organizations face more crises than they did ten years ago (many of the cyber variety), and 80% note that their companies have had to mobilize their crisis management teams at least once in the past two years. 

Experience is a great teacher
Undergoing a crisis tends to galvanize an organization, inspiring leadership to prioritize detecting and preventing crises in addition to managing them. For example, nearly 90% of organizations surveyed have conducted reviews following a crisis, and while these companies did not always foresee the crises in question, they did recognize that they might have been averted. As a result, they are now more likely to take action to forestall future crises.

Leaders need more development for crisis management
Helping leaders display their full range of competencies under the extreme pressures of a crisis can support effective decision-making and communication when they are most needed. Organizations should establish a leadership structure for a crisis to help define roles and responsibilities, and training should be provided – particularly when it comes to communicating with stakeholders. Companies should also identify the leadership styles of particular executives and managers, and work out who would be best placed to deal with certain aspects of the crisis response.

Confidence isn’t everything
A company’s confidence in its crisis management capabilities is not always in line with its level of preparedness. Even as 86% of survey respondents report feeling fairly or very mature in their crisis preparedness, most of those admit they haven’t yet had that belief tested by an actual or even a simulated crisis. For example, while nearly 90% of respondents are confident in their organization's ability to deal with a corporate scandal, only 17% have tested that assumption through a simulation exercise.   

Readiness rules – and leadership needs to be all-in
Being at the ready can significantly reduce the negative impact of a crisis – especially if senior management and board members have been involved in creating a crisis plan and participating in crisis simulations. But nearly a quarter of respondents cite the effectiveness of leadership and decision-making as one of the greatest crisis management challenges their organizations face. In fact, leadership commitment (or lack thereof) was deemed to be the primary challenge for respondents, followed by the effectiveness of teamwork, familiarity with the crisis structure/response process and clarity of roles and responsibilities.

The role of third parties 
While Deloitte's research found that many crises emanate from the actions of third parties, those third parties themselves often play an important role in helping to manage and mitigate the problems. The key is to extend the partnership to include crisis preparedness – 59% of respondents say that they participate in crisis exercises with third parties, examine third parties' crisis plans or both.  
In summarizing these findings, Deloitte’s Dent notes: "Crises aren't inevitable. Many of them are avoidable, which is why smart business leaders invest in crisis management capabilities. These strengths can help their organizations avoid costly, and sometimes irreparable, damage to finances, employee morale, brand and reputation."

AUGUST 14, 2018
Paying Attention to Retention
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Paying Attention to RetentionIt’s hard to find good employees – and harder to keep them. That’s been true for a long time, but as infamously job-hopping Millennials continue to make up a larger and larger share of the workforce, and as the unemployment rate continues to fall, it’s a more urgent challenge than ever before.

Janet Zuccarini of the Gusto 54 Restaurant Group recently shared some tips on how to keep your best employees for the long haul. While restaurants and financial institutions may be entirely different kinds of workplaces, many of her thoughts ring true across a variety of industries. Here are some key takeaways:

Nature versus nurture
When interviewing candidates or analyzing employees, make sure you’re scanning for the right things. For example, while some key skills or characteristics may be absolute musts, others can likely be learned and developed with the right training. Zuccarini looks for passion, self-awareness and a clear interest in growing with the team, as opposed to simply a checklist of direct restaurant experience. Her bottom line – survey people not only with what you want and need in the here and now, but for their potential to grow into the role you have in mind.

Instill an entrepreneurial attitude

Employees should be encouraged to think outside the box, to be proactive and to feel a sense of ownership toward the organization – in other words, the kind of buy-in that creates enthusiastic and loyal employees.

Demonstrate loyalty in order to receive it in return
If you’re asking for loyalty from your employees, you should be giving it as well. Investing in your employees’ skill sets benefits both the company and the individual, and sincere support and career development are important to Millennials. 

“The right culture can make or break your retention – and that means your financial success as well,” Zuccarini says. “The right people are the most valuable resource in our industry, and decisions should be made through that lens.”

AUGUST 13, 2018
Acronym Attack! FinREC on CECL
By Mark Loehrke, Editor, Financial Managers Society

As CECL bears down, folks in the banking industry are likely finding themselves drifting into one of two groups – those who have already had their fill of the new standard and would be content to never see or hear its name again and those who may not be looking forward to CECL, exactly, but who know what’s involved and are therefore looking for any information they can find to help them prepare for it.

For those in the latter group, or even those with a foot in both camps, the American Institute of CPAs’ Financial Reporting Executive Committee – or FinREC – has issued a pair of working drafts on dealing with two particular aspects of the upcoming FASB standard. The guidance on Zero Expected Credit Losses deals with how to handle a financial asset or group of financial assets whose historical credit loss information results in an expectation of nonpayment of the amortized cost basis of zero. The second document on Reversion Method: Estimation vs. Accounting Policy, meanwhile, explains how to distinguish between an accounting policy election, an estimation technique and an accounting policy election that’s inseparable from the estimation technique.

FinREC is seeking feedback on these working drafts until October 10. In the meantime, FMS members should keep in mind that CECL Central is another great source of timely information on the new standard.

AUGUST 10, 2018
FMS Perspective: Securing the Most Favorable Prices for Securities Transactions
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

The market for fixed-income securities has seen some major changes in the past few years, but the amount of pre-trade pricing information for these transactions is still limited compared to equities. With regulators requiring all reasonable efforts be made to obtain the most favorable price in each securities transactions, banks really feel the pressure to make sure they have a solid system in place.

In our latest FMS Perspectives piece, Securing the Most Favorable Prices for Securities Transactions, Robert Segal of Atlantic Capital Strategies discusses the challenges and best practices of doing just that. From rigorous reviews to back-testing programs, he offers timely advice to help satisfy regulators and avoid leaving money on the table.

AUGUST 9, 2018
Is Your Institution Entrepreneurial?
By Mark Loehrke, Editor, Financial Managers Society

Financial institutions aren’t often seen as hotbeds for the entrepreneurial spirit that seems so commonplace among, say, tech firms. But just because the financial industry is often viewed as a more “traditional” (read: old-fashioned) arena doesn’t mean that banks and credit unions can’t demonstrate the same kind of cutting-edge thinking and innovative problem-solving that characterizes the most nimble start-up organizations – in fact, their eventual survival may depend on it.

While not every institution will be able to lay claim to a revolutionary product or service, there are still benefits to be reaped from embracing a more entrepreneurial outlook, which starts by building a culture designed around entrepreneurial attitudes and values. A few ideas for getting there:

Rethink the team
While banking is still your core business, consider the potential benefits of having a few key team members who come from outside that world – they may bring in new ideas that someone with decades in the industry may never have considered. 

Take some calculated risks
Not every big idea is going to pay off, but by taking a few shots that appear to have minimal downside, even those that don’t succeed won’t end up hurting too much.

Listen to your customers
Some of the best ideas for your institution may be coming from the people walking in and out of your branches or logging into your website. Encourage your staff to really listen to what your customers are saying, because even the craziest suggestion may have the potential to turn into something big.

AUGUST 8, 2018
FMS Webinar: The Changing Landscape of Liquidity
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

FMS Webinar: Strategic Implications of CECL

If the dog days of summer have you hiding in the air conditioning, make the most of that time with our upcoming webinar. On Wednesday, August 22, Joe Kennerson of Darling Consulting Group covers The Changing Landscape of Liquidity. As loan growth outpaces deposit growth and loans become a higher percentage of total assets, deposit uncertainty abounds. Join us as Joe addresses the changing liquidity landscape in the industry, and reveals what every institution should be doing to develop a “best practice” approach to liquidity management. 

As always, these sessions are complimentary for FMS members. (Not a member? Join today!)

AUGUST 7, 2018
Ransomware Attacks: To Pay or Not To Pay?
By Mark Loehrke, Editor, Financial Managers Society

It’s a question most businesses hope never to have to answer – whether to pay a hacker in the event of a ransomware attack. But as cyber crime continues to proliferate and criminals become bolder and more sophisticated, this unappealing debate may be closer to affecting your institution than you’d like to believe.  

The knee-jerk reaction, of course, is not to pay – not only because it just plain feels wrong to tacitly reward criminal behavior, but also because doing so may identify you as a willing mark for future attacks. On the other hand, the threat of permanently losing data or having to pay out many multiples of the initial ransom in order to just get operations back up and running can both be powerful arguments to simply get the matter resolved, however distastefully. 

This was the no-win situation in which the City of Atlanta found itself earlier this year, as the ultimate decision to not pay a $51,000 ransomware demand resulted in an estimated recovery price tag of more than $14 million to get the city’s many systems back online. Most government officials and cyber experts tend to agree with the Atlanta decision, holding fast to the righteous notion of not paying in instances like this. In many cases, they say, paying the ransom doesn’t work anyway – a recent study notes that of the 45% of U.S. companies to suffer a ransomware attack and pay in 2017, only 26% got their systems back as promised (it’s a criminal making the promise, after all) and 73% fell victim to repeat attacks (the easy mark problem). But things get a little more complicated when the theoretical debate hits a little bit closer to home – that is, when it’s your institution facing a ransomware attack and your data on the line.

But before an organization ever gets to the point of that difficult decision, experts agree that the best thing to do is to minimize the possibility of an incident ever happening in the first place. That means paying attention to basic IT routines such as promptly patching system vulnerabilities, restricting access to key systems, regularly backing up critical data and staying up to date with organization-wide employee training and threat awareness.


Mark Loehrke
Editor and Director, Publications and Research

Danielle Holland

Hilary Collins
Specialist, Publications and Research