Risk management is top of mind for CUs.
The Federal Reserve Board issued risk management guidance in 1995, which emphasizes that all financial institutions' boards are responsible for their organizations' condition and performance. While board members can't be expected to understand the full details of their institution's activities, the guidance makes it clear they should fully understand the types of risk exposures they face and should receive reports that identify the size and significance of those risks.
One of a credit union's most important operating committees is the Asset and Liability Management Committee (ALCO), which oversees balance sheet risk management. ALM can get very complicated, and effective direction requires the board to rely on the ALCO to produce sound strategies based on ALM outputs. In turn, ALM outputs are based on the correct use of models.
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