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Why is strategic planning important? The examiners look at a credit union’s strategic plan and business plan as part of their analysis of strategic risk in the exam process. Strategic risk is the current and prospective risk to earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. Strategic risk is a function of the compatibility of a credit union’s strategic goals, the business strategies developed to achieve those goals, and the quality of implementation. The tangible and intangible resources needed to carry out business strategies include communication channels, operating systems, delivery networks, monitoring systems, and managerial capacities and capabilities.
What is the purpose of strategic planning? Credit unions participate in the strategic planning process in order to create a vision for the future and to manage toward that vision. Through strategic planning, a credit union can align short-term decisions with long-term goals. (Short-term goals are those goals of one year or less in duration. Long-term goals are typically goals that will take one to three years to achieve.) Strategic planning answers three key questions: 1) Where are we today? 2) Where do we want to be in the future? 3) What should we be focused on today so that we’ll be where we want to be in the future?
Steps in the Strategic Planning Process According to information presented by the National Credit Union Administration, the strategic planning process should include the following steps: • •
Update on goal accomplishments since the last planning session Review of the credit union’s growth patterns o Analyze a five-year history of credit union performance Key financial performance ratios • Custom Performance Report provided quarterly by the League of Southeastern Credit Unions • Peer group comparison as appears on www.ncua.gov • Select similar peers for comparison o Asset size o Number of members o Services offered o Other key factors to be determined on an individual basis Member usage of products and services Membership growth
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Analysis of where members live can be useful if new branch locations are proposed
Analyze current operating environment o SWOT Analysis Strengths • Characteristics of the credit union that enhance its effectiveness. Strengths are generally internal; something the credit union is able to control. Weaknesses • Lacking force, power or intensity; characteristics of the credit union that limit its effectiveness. A weakness is internal; weaknesses are characteristics which the credit union should be able to control. Opportunities • A favorable juncture of circumstances; a good chance for advancement or progress; an external area where the credit union has or can create an advantage in the marketplace. Threats • An indication of impending harm; areas of concern outside the credit union that may directly or indirectly affect your business; areas the credit union might need to avoid or plan for a strategic response. A threat is a force beyond the control of the credit union. o Discuss your vision for the future of the credit union—how will the credit union evolve to meet the changing needs of the membership over the next three years Composition of membership Competition Growth levels achieved Trends impacting the financial services industry o Economic indicators (www.cuna.org, Research & Statistics;Florida Profile, published quarterly by the League of Southeastern Credit Unions, www.lscu.coop) o U.S. Credit Union Profile (www.cuna.org, Research & Statistics) o Benefits of Membership-state profiles prepared by CUNA (www.cuna.org) o Statistics available from www.ncua.gov o Statistics available from www.fdic.gov o (You can choose to present information on innovative ideas being implemented by credit unions and/or banks that might be appropriate for implementation at your credit union.)
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o (You can choose to present information on any other topic or topics that have a significant impact on the operations of your credit union.) o (You can choose to present information on regulatory hot topics to increase Board members’ knowledge base of what will be important to your regulators in the upcoming year.) Establish short-term (one year or less) and long-term (one to three years in duration) SMART goals: o Specific o Measurable o Attainable o Results-oriented o Time-bound o (You may only be able to establish the framework for the goals during the planning session as some goals may require additional research.) Align growth plans with budget. o Any goals should fit within the credit union’s established budget or revised budget. o The impact of proposed goals on key financial performance ratios should also be considered.