Governance and Compliance for Credit Unions
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Breakfast Seminar Presentation 09.05.13
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Governance and Compliance for Credit Unions
- 1. Welcome
- 3. We have adapted to the changing dynamics in the Credit Union Sector Our services include: Introduction to le chéile Group • Investments • Insurances • Governance • Debit Cards
- 4. The importance of Credit Unions today over Banks Credit Unions are trusted and wanted by the Public, State and Troika Current challenges: • Keeping on top of loan books • Tackling increasing costs • Finding new revenue streams • Meeting the demands of increasing regulation emanating from the 2012 Act. The Credit Union Sector le chéile Group can help you meet these challenges!
- 5. Introduction to Alan Founder Empeira Corporate Governance Advisors Fellow & Former Chairman of the Marketing Institute of Ireland UCD Post-Grad Diploma in Corporate Governance Member Institute of Directors in Ireland AACB Certified Corporate Governance Assessor Founder of The Corporate Governance Association of Ireland Former Board Member of Dundrum Credit Union Former Chair of DCU’s Governance, Risk & Compliance Committee Alan McDonnell T. 01 296 1008 M. 086 831 8213 E. alan.mcdonnell@empeira.com
- 6. Introduction to Empeira What makes us different? We’re highly qualified in governance, risk & compliance! We’re small & focused! Who you meet does the work! We’re free from professional conflicts! We’re known to the Central Bank! We’ve extensive careers in financial services! Sean O’Dwyer Principal Michael Kelly Principal Paul White Principal Donal Keane Principal Alan McDonnell Principal Maurice Harte Chairman
- 7. Empeira’s Services Governance Review Strategic Planning Structures & Processes Board Training Risk Management Merger Facilitation New Product Business Plans Business Continuity Planning Performance Evaluations Succession Planning Internal Audit Planning Risk & Compliance Framework Board- Management Interface Oversight Committee Assessments www.empeira.com
- 9. “The board of a credit union shall perform its duties in an entirely non-executive manner, and shall not be involved in the performance of executive functions”. Commission Final Report March 2012 Boards New Governance Role
- 10. Structures & Processes GRC Committee Merger Risk Succession Planning Credit Union Act Part IV Compliance Officer Boards New Governance Role
- 11. Empeira Governanc e Review Board Self- Assessment Survey Prioritised Roadmap to Complianc e And, ReBo? Rating Complianc e with each Provision CU Act Part IV 200 Board Governance Provisions BOC Monitors Compliance IA Monitors Compliance RCOs Monitor Compliance PRISM Monitors Compliance Directors’ Complianc e Statement Empeira Governance Review
- 12. Empeira Governance Review Review Process 1. Conduct a meeting to scope the survey to credit union’s specification 2. Design of agreed questionnaire within ‘Survey Monkey’ 3. Provide response access to board members for agreed period 4. Close survey on agreed date and collate responses 5. Analyse results by each of the 23 Sections of Part IV of the Act 6. Prioritise each provision based on its fully-compliant rating 7. Illustrate Primary & Secondary priorities relative to each section’s mean 8. Provide soft-copy 45 page report with compliance ratings for all Sections 9. Make a board presentation summarising the results and recommending actions to address the Primary priorities 10.Discuss next steps
- 14. Issues Arising
- 16. Operational Focus • Small • No/few staff • Hands-on Board • Focus on doing • Passion for mission • Accountable to members • Caught in a time-warp • Mature organisation • Paid staff • Policy-making Board • Focus on supervision • Risk & compliance • Accountable to stakeholders • Forward-looking Oversight Focus Transition Challenge
- 17. Leave Outside • Nominator’s Interests • Personal Interests • Operational Interference Inside Focus • Mission & Values • Policies • Strategy • KPI’s (Objectives) • Resources • Delegation • Challenge • Risk & Compliance • Statutory Duties • Transparency • Accountability Inside the Oversight Boardroom Door
- 19. The chair’s functions shall include conducting a performance evaluation of each member of the board of directors on an annual basis to ensure that each director is complying with their obligations under financial services legislation and the board’s objectives as set out in the credit union’s strategic plan. Section 55A(3) Annual Director Performance Evaluation
- 20. The board of directors of a credit union shall carry out a comprehensive review of its overall performance, relative to its objectives, at a minimum on an annual basis and implement any necessary changes or improvements. The review shall be documented in writing. Section 55(4)(5) Annual Board Performance Evaluation
- 22. The manager shall be the chief executive officer of the credit union having responsibility for the day-today management of the credit union’s operations, compliance and performance and shall be responsible to the board of directors for the performance of his or her functions. Section 63A Credit Union Act 2012 Board- Management Dynamics
- 23. Governance Issues • Delegation Skills • Clarity of Authorities • Matters Reserved • Clarity of Objectives • Mgt Performance Reviews • Committee Mandates Operational Issues • Mgt Reporting Lines • New Management Skills • Strategic Objectives & KPI’s • Clarity of Policies • Resources vs Costs • Board Oversight Competencies Board- Management Dynamics
- 24. Board Responsibility Supervision Policymaking Strategy Making Accountability Management Responsibility Operations Strategy Execution Reporting Accountability The Board holds the management to account Excessive Board involvement in operations blurs management accountabilities Board- Management Dynamics
- 25. Dominant Chairman Syndrome Dominant Manager Syndrome Board Oversight Committee Guidance on Assessment of Chair & Manager Performance Evaluations? Board-Management Dynamics
- 26. Risk & Compliance Reporting Lines & Role Structures
- 27. Risk Manager Compliance Manager The functions of the board of directors shall include identifying... other officer positions within the credit union... which, together with the manager, risk management officer, compliance officer, credit officer and credit control officer... are referred to in this Act as the ‘management team’ Section 55 (1)i Reporting Lines Internal Audit Function
- 28. Role Structures 5.2.3 The Commission recommends that it be mandatory that credit union appoint a risk management and compliance officer. Interim Report Final Report Empeira can find no grounds to claim there is a conflict or loss of independence in combining the role?
- 29. Board Structures & Processes
- 30. Accountability Policymaking Supervision Strategy Making Ensuring external accountabilities are met e.g. to members, regulators and stakeholders Setting & safeguarding the credit union’s mission and values Describing long-term vision Ensuring appropriate policies & internal controls are in place Approving strategic plan & objectives of the credit union Defining & agreeing measurable KPIs Reviewing major resources Appointing senior management Overseeing management performance Ensuring compliance with legal & regulatory obligations Overseeing risk & controls Monitoring financial controls Board Structures Director Selection, Induction, Training & Development Committee Structure & Charters Board Performance Evaluations Internal Control Functions Board Governance Manual Records Repository Board Processes Board Processes Long TermShort Term Long Term Setting remuneration terms Promoting Transparency Succession Planning Identifying risks to objectives Financial Reporting & Accountability Setting the tone-at-the-top Board Structures & Processes
- 31. Risk Oversight
- 32. Insist on ISO 31000 Standard! Risk Management Framework Risk is defined as “the effect of uncertainty on objectives” This definition of risk can most easily be applied when the objectives of the organisation are comprehensively and fully stated in the form of a strategic plan.
- 33. Risk Appetite “Amount and type of risk that an organisation is willing to pursue or retain” Authority delegated to management Risk Tolerance “Organisation's readiness to bear the risk after risk treatment in order to achieve its objectives” Authority reserved to the board Risk Appetite & Tolerance Risk Management - Vocabulary
- 34. Consequence Scores (B) 1 = Insignificant 2 = Minor 3 = Moderate 4 = Major 5 = Catastrophic Risk Identification Risk Appetite Up to 10 Risk Tolerance Up to 15 Likelihood Scores (A) 1 = Remote 2 = Unlikely 3 = Possible 4 = Likely 5 = Definite X Risk Management Framework Residual Risk Scores (AxB) 2-4 = Appropriate 5-10 = Acceptable 11-15 = Tolerable 16+ = Intolerable Multi-level Risk Governance Board Risk Committee RCO & IA Category Manager Risk Owner Controls/ Treatments Inherent Risk Score (AxB)
- 35. Q & A Thank You