Published in: CU Business

The strategic planning season is ramping up and many financial institutions have initiated the process of preparing for 2020 – identifying likely challenges, defining strategic direction, and forecasting the balance sheet and financial performance through the budgeting process. One of the top questions we field this time of year, whether lighthearted or not, is what rates are going to do over the coming year. Will the Fed cut rates, and if so, how many times and when? Will the 10-year Treasury yield face continued downward pressure stimulating a late 2012, early 2013 wave of refinance activity? We may not have a crystal ball, but we do have a few thoughts on how to keep speculation from dominating your strategic conversations and how to budget more effectively.

While no strategic plan is bulletproof, the planning and budgeting process should incorporate the key tenets of ongoing successful balance sheet management – namely funds management and capital planning. By prioritizing both components within the planning and budgeting framework, institutions should find that preparing for the upcoming year and determining the most appropriate strategic course of action should be no more challenging than the daily balance sheet management process.

Step 0: Establish Your Risk
Appetite and Strategic Goals

Policies are the starting point for any strategic conversation, detailing the general goals of the institution and the risk parameters to operate within to get there. If your institution’s risk policies are well structured, comprehensive, and include statements defining the general strategic goals and risk appetite of the Board, then this step is likely already complete. However, if you can’t easily identify goals and risk preferences, pump the breaks on detailed planning and have this conversation first.

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