Pub. 8 2019 Issue 3

The CommunityBanker 8 Navigating with Excellence in Unpredictable Times By Bill Bojan, CLA F E A T U R E I n addition to many exciting new opportunities, the com- munity banking industry has experienced heightened and accelerating change, disruption, and risk over the last ten years. The ever-changing regulatory expectations, disruptive competition (e.g., fin-tech lending alternatives), new innovation (e.g., technology advancements, mobile banking, big data trends, etc.), and new threats (e.g., cyber risk, malware, and changing consumer expectations), have together magnified an environment where dynamic navi - gation and agile decision-making is critical. This challeng- ing environment is further evidenced by a 50% reduction in the number of community banks nation-wide over this relatively short ten-year period – especially concentrated among smaller-sized institutions. This mix of change, disruption, and risk create a less pre- dictable environment, and one that can represent formidable “head- winds” for community banks and the industry in general over time. Banking leaders and boards must have the strongest possible “navigation systems” to successfully navi- gate the future risks, opportunities, and marketplace realities of today and into the future. This can be measured in terms of three dimensions and four processes. A Bank’s three navigation dimensions: • Board of Directors (Oversight Dimension) – The bar of expectations for effective board oversight has been raised, personal exposure is increasing, and recruiting qualified high-impact leaders for director - ship positions has become an increasing challenge for many community banks. • Management Team (Execution Dimension) – Man- aging additional regulatory burdens and expecta- tions, along with new and often unpredictable risk exposures – all while juggling strategy, growth and acquisition opportunities – can create major time constraints and push the bank’s execution processes, systems and people beyond their current limits. • Monitoring Disciplines (Verification Dimension) – The cost of compliance continues to grow, often outpacing the ROI on such costs, and community banks face a formidable competitive challenge attract- ing quality personnel to critical audit, compliance and risk positions. A Bank’s four navigation processes: • Strategic Planning – The strategic planning process for today’s community banks must be in- novative, dynamic, agile, and real-time to respond to both the opportunities and threats present in today’s banking marketplace. • Board Governance – The board governance pro- cess for today’s community banks must be engaged, demonstrable, and real-time to meet the growing regulatory expectations and give the community banking industry the highest likelihood of sustain- able regulatory relief in the future. • Risk Management – The risk management process for today’s community banks must be strategic, all- encompassing (beyond the more traditional financial banking risks), and real-time to both protect the bank’s interests and to meet the heightened regula- tory expectations around a stronger Enterprise Risk Management (ERM) discipline bank-wide. • Compliance Monitoring – The compliance monitor- ing process for today’s community banks must be efficient, as well as connected and aligned with the risk management, strategic planning, and board gov- ernance processes. ► ► ► ► ►