By: Michael Oravetz | CUNA Councils
With the end of the record low rate environment, it’s time for credit unions to examine their balance sheets and ask some key questions, such as: Is our funding strategy adequate? Are funds allocated to the right asset classes? While these questions deserve consideration, another one is paramount in relation to interest-rate sensitivity: Is my ALM process effective?
Managers need the right information to make the right decisions. The ALM process should include actionable information that is timely and accurate. To assess the quality of a credit union’s ALM process and pinpoint ways to improve it, look at these three factors: data, cash flow integrity, and analytics. As shown in Figure 1, these influencers are sequentially related in that a deficiency in any one of them flows to the next and negatively affects the end result.