Apr 29 2011

The Florida Financial Hurricane: A Credit Union Risk Management Case Study


Do you know your credit union’s risks? Are you sure? This latest publication from Filene takes a deep dive into the always confounding world of credit union risk management with real-world examples.

This case follows the plight of Sunbeam Credit Union in Florida, a real credit union whose name has been changed. This credit union did not participate in subprime lending, thereby avoiding some of the era’s most obvious risks. But, it was nevertheless slammed by other simultaneous shocks, such as a membership exodus and the failure of high- grade loans.

The second- and third- order impact of the events of the subprime debacle—the collapse of the construction industry and the subsequent emigration of construction workers,along with the loss of jobs—had the greatest impact on the credit union.

Using actual financial results from the years leading up to the real estate crisis of 2007, case readers analyze the strategic decisions of Sunbeam’s leadership team and identify options for the credit union as it faces rising delinquencies and increasing regulatory restrictions.

The case also forces readers to think about hard trade-offs between the inclination to serve members at any cost and the financial realities hard-hit credit unions face. As with any good case, the most salient considerations—excellent underwriting, strategic lending decisions—may no longer be under the control of the actors. Their options are constrained by decisions made long ago.

This case is useful for:

  • Senior executive teams that want to challenge their risk assumptions.
  • Boards of directors seeking to expand their risk management thinking.
  • Employee training for strategic management.

The ending to this case is not written. That is intentional, because there is no such thing as a right answer here. There’s only effective risk planning, and that exercise is for you.

Report Number 236