Am I George Costanza?
I used to watch Seinfeld all the time and can remember pieces of just about every episode that was made. One that struck me as I was working on this was when George got a new job and was asked to read a book about Risk Management. When I first saw that episode, I thought it was hilarious, never believing that most of my job would eventually be Risk Management. Running a financial institution, especially from the finance side, is all about managing risk. A few of the biggies that I deal with are Credit Risk and Interest Rate Risk.
When we make a loan, we hope that the borrower will pay us back. The risk that they won’t is credit risk. We have an entire department whose main focus is dealing with borrowers who haven’t held up their side of the bargain. That department is right outside of my office and it is interesting to ‘overhear’ them doing their work. As you might imagine, they spend a lot of time on the phone talking to people who don’t want to hear from us. It takes much more patience than I will ever have to be successful in managing credit risk from the front line.
Interest rate risk is more up my alley. All credit unions are basically in the business of arbitrage. We borrow money from our members at one rate and package that money into loans at another (higher) rate. The difference is our spread, which is used to build branches, ATM’s, computer systems and the like. We just hope that we add enough value with that spread to keep members coming back with their deposit and loan needs. My job is to make sure the spread is not too much and not too little, but just right for solvency and future objectives.
Unlike George, who had an assistant/protégé to read the Risk Management book for him, I am left to understand it myself. The upside is that I love my job. Does that make me crazy?