Monday, June 24, 2013

Strategic Planning Tools for Community Banks

With the onset of the summer months, community bank CEOs and their boards of directors start to think about updating strategic business plans prior to the autumn budget season and the start of a new fiscal calendar year.  Some do it with facilitated planning retreats, others at regularly scheduled board meetings, others use bank-wide roll-up techniques.  Regardless of the method used, the goal is to set direction, goals, and objectives.  Including fine-tuning performance measures, tweaking product offerings, altering (or validating) geographic presences, and adjusting risk limits.  Then promoting a shared understanding among employees through strong and effective written and oral communications efforts.

Recently, the Office of the Comptroller of the Currency (OCC)  released two free documents that can help make community bank strategic planning more effective.   The first is:  A Common Sense Approach to Community Banking.  I like this document the best from the current crop of community banking-oriented publications coming out of the Federal bank regulatory agencies because this one was developed by bank examiners.

Bank examiners are front-line practitioners of the art of management appraisal, so their best-practice themes about the bank management process, banking risk management, and corporate governance come from personal observations and experiences gleaned from a career of performing examinations of banks of many sizes and in varied locations.  It is one of the reasons most community bankers consistently say that they really value the informal chats they have with members of their examination teams.  They know these examiners have combed through the innards of many banks and have seen the good, the bad, and the ugly when it comes to banking practices.

The guide integrates risk assessment and risk management with strategic planning and strategic planning's critically important component, capital planning.  It is the first publication that lobbies for a structured, but appropriately tailored, Enterprise Risk Management (ERM) process for community banks.  The guide also highlights the benefits of risk management contingency planning through scenario analysis and stress testing.

Frankly, it beats the hell out of the cost of a fancy pants banking consultant... because its valuable advice is free and, if you are a national bank or federal thrift, it also comes with lifetime technical support - your OCC assigned portfolio manager and his or her Assistant Deputy Comptroller.  They can help with the "what to" and learning resources; the "how to" is up to you and your talented staff.

The second document, which complements the first perfectly, is the latest OCC Semiannual Risk Perspective.  The report aims to highlight issues that pose threats to the safety and soundness of banks and thrifts.  The report presents information from four points of view: 1) The Operating Environment, 2) The Condition and Performance of Banks, 3) Funding, Liquidity, and Interest Rate Risk, and 4) Regulatory Actions.

It represents the "T" in the SWOT  Analysis (Strengths, Weaknesses, Opportunities, and Threats) referred to in the Strategic Planning section of  A Common Sense Approach to Community Banking.  It is a must-read for bank CEOs and board members wanting to get a better grasp on external threats to the health of the banking system.

Well-grounded freebies like A Common Sense Approach to Community Banking and the OCC Semiannual Risk Perspective, coming at a time when community banks are sweating every dime, is a helping hand gratefully accepted.  Gosh, the only thing that could make this combination even sweeter would be an assessment rebate from the Comptroller!

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