Management affects all seven risks found in credit union operations – credit, interest rate, liquidity, transaction, compliance, strategic, and reputation. (The Risk-Focused Program chapter contains a description of the seven risks faced by credit unions.) This chapter will focus on the following risks:
- Strategic risk occurs when management fails to (1) perform adequate due diligence for existing, new, and proposed products and services, (2) act on recommendations included in examinations and internal/external audit reports, and (3) allocate the necessary resources to adequately manage the credit union in a safe and sound manner;
- Compliance risk occurs when the credit union fails to adhere to applicable laws and regulations; and
- Reputation risk occurs when management fails to meet its fiduciary duties, resulting in poor publicity or administrative action.