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Credit Union Risk Management… PowerPoint Presentation
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Credit Union Risk Management…

Credit Union Risk Management…

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Credit Union Risk Management…

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  1. Credit Union Risk Management United Kingdom 2007 Credit Union Risk Management… “Is the method of management we use to identify, measure, and control risks that might threaten the international credit union movement, its members, employees, and volunteers!” Presented by: CUNA Mutual Benchmarking Team - 2007 RMLearningCenter.com

  2. Very Good! Let’s Review! RMLearningCenter.com

  3. Tips for public speaking: • Know your audience wants and interests. • Control your topic & promotions • It’s not only numbers that count • Conference breakout vs. fireside chats? • Learn from experience, teach by examples! • Set the tone and expectations early… • Read chapter IV… RMLearningCenter.com

  4. Outline Benefits: • Features tell and benefits sell… • Encourage audience participation, but • Control it! • Be honest and admit what you don’t know.. • Focus on “best practices” it reinforces good behavior and avoids a focus on negatives that only foster defensive attitudes! • Keep it simple and down-to-earth… RMLearningCenter.com

  5. UK CU’s are Normal: • They don’t think it will happen to them.. • They’re prone to ½ life and cynical attitudes that ignore reality. • They want to be liked.. • They’re real focus is on family and personal survival.. • They prefer to be heard and not told… RMLearningCenter.com

  6. Very Good! Let’s Review! RMLearningCenter.com

  7. The benefits from this session are many! We’ll discuss… • Risk Management fundamentals, • The status of RM projects in the UK, • Fidelity bond risk’ controls recommended for UK credit unions (To safeguard against Burglaries, Robberies, Frauds, Forgeries, Embezzlements, Scams, Plastic Card Fraud, Liability, etc.) • The latest criminal “Methods of Operation” (MOs) in the UK, and we’ll update your… RMLearningCenter.com

  8. Session Benefits at a Glance – Continued..We’ll help you update your RM Strategic Action Plans for… • Creating controllable crime scenes, • Creating defendable zones, • Integrating security systems, and • Adopting “Crime Prevention Through Environmental Design” principles into your facility management program, and… RMLearningCenter.com

  9. Session Benefits at a Glance – Continued..We’ll help you update your RM Strategic Action Plans for… • Developing Best Practices’ RM training for employees, staff and volunteers, • Developing public-to-private partnerships with law enforcement, fire fighters, emergency government’ and homeland security’ personnel, and we’ll introduce 2007 Strategic Action Plans for… RMLearningCenter.com

  10. Session Benefits at a Glance – Continued..We’ll introduce 2007 Strategic Action Plans for… • Developing a “Credit Union’ Incident Command and Control System” in 2007, • Deploying an “Incident Command and Control at the CU Chapter level,” • Updating credit union’ housing-in-place and evacuation protocols! And, • We’ll discuss any risk that threatens the UK credit union movement! RMLearningCenter.com

  11. Session Benefits at a Glance – Continued..“We’ll use case studies to highlight what the crooks are doing and what we need to do to catch them!” For example… • Is our credit union and chapter ready for the next natural disaster, terrorist attack, or pandemic? • Is our credit union part of any “branch banking” network? • What changes should we have made in your contingency, business continuity, and management succession plans since 9-11-01? RMLearningCenter.com

  12. Session Benefits at a Glance – Continued..“We’ll use case studies to highlight what the crooks are doing and what we need to do to catch them!” For example… • We know crooks are learning to use the internet to recruit and train. Are we? • You’ll learn how to “reverse trace” and authenticate transactions, and how to analyze a written statement or internet scam. • You’ll learn how to manage concentrated risks and exposures to reduce looting, burglaries, robberies, and frauds during and after natural disasters, terrorist attacks, or a pandemic. RMLearningCenter.com

  13. Evolution Of RM and CU Movement - continued • 1960s Robbery and burglary • 1970s Forgery and check fraud • 1980s Embezzlement and disasters • 1990s Violence in the workplace • Armed robbery, bomb threats and disasters • 2000 Electronic commerce • 2001 – 2003 Violence in The Workplace! • Bomb Threats & Extortion • Terrorism, Anthrax Scares, Threat of Biological Warfare • Internet Fraud, Scams, Money Laundering and • “Criminal Integration” RMLearningCenter.com

  14. “After 9-11-01 there was a quantum shift from proactively management risks to proactive planning to respond to any large scale community or country crisis!”Rich Woldt • September 11, 2001 … Terrorists attack the World Trade Center in New York City, NY USA! • 2005… The world is racked with tsunamis, hurricanes, earthquakes, tornados, bombings, and daily threats of future terrorist attacks. • Emergency governments around the world adopted the Incident Command and Control System (ICS) as a response standard and NIMS to standardize response terminology. RMLearningCenter.com

  15. “After 9-11-01 there was a quantum shift from proactively management risks to proactive planning to respond to any large scale community or country crisis!”Rich Woldt • Emergency governments around the world adopted the Incident Command and Control System (ICS) as a response standard and the National Incident Management System to standardize response terminology. RMLearningCenter.com

  16. “After 9-11-00 there was a quantum shift from proactively management risks to proactive planning to respond to any large scale community or country crisis!”Rich Woldt • From all levels of government the order goes out to form effective first responder “Public – to – Private” partnerships. Critical industries are asked to set response protocols based on: • A 72 hours stand-alone performance standard, • Required housing-in-place performance standards, • Required upgrade in high-rise evacuation standards, • Demonstrated active community involvement in contingency planning with a focus on responding during a natural disaster, terrorist att RMLearningCenter.com

  17. This is a “what if” exercise: • We use “what ifs” much like we use “worst case scenarios” and “reverse RM logic” • So if… RMLearningCenter.com

  18. This is a “what if” exercise: We know the losses credit unions and the insurance industry experienced during Katrina, what if: • All credit unions and members were identified by their zip or postal code? • All victims had the following info stream on the left fore arm: (Zip code, name, age, medical disability, physical disability, destination land line number, personal cell phone #? RMLearningCenter.com

  19. This is a “what if” exercise - continued • All CUNA Mutual bond/insurance files could be sorted by zip/postal code? • All CUNA Mutual employees could be sorted by zip/postal code? • All credit unions and CU chapters could be sorted by zip/postal code? • All CU members could be sorted by zip/postal code? RMLearningCenter.com

  20. Could we not than better… • Identify our bonded and insured exposures in harms way? • Measure our potential claims based on exposure concentrations? • Assemble and position response assets to include CUNA Mutual first responders? • Track and indemnify victims, thereby reducing loss adjustment expenses (LAE) and CU extra expense? RMLearningCenter.com

  21. Could we not than better… • Customize RM workshops, presentations, on-site analysis, etc. to regional and local area risks s RMLearningCenter.com

  22. Let’s begin with… A Review of RM Fundamentals! RMLearningCenter.com

  23. Risk Management fundamentals:Please define and explain the following: • The three RM steps? • The two types of risk? • The five RM controls? • The two ways you measure risk? • At least three “tools of transfer? RMLearningCenter.com

  24. Very Good! Let’s Review! RMLearningCenter.com

  25. Risk Management “A Method Of Management” “Our 2007’ goal is to speed up the process!” • Identify Currency & cash items • Measure Frequency & severity 3. Control RMLearningCenter.com

  26. Two Types of Risks Pure Risks - only loss, never a gain • Robbery & burglary • Embezzlement • Other forms of dishonesty • Fire and disasters Speculative Risks – You hope to gain, but you can suffer a loss • New products, programs, services and laws RMLearningCenter.com

  27. 5 Risk Controls“Use them in the following order!” • Avoid • Reduce • Spread • Assume and • Effectively Transfer to Someone Else • Insurance, Bonds, Hold Harmless Agreements RMLearningCenter.com

  28. Risk Management fundamentals – continued..Please define and explain the following: • Underwriter Laboratory’s (UL) “burglary resistant” ratings and/or European equivalents, • UL “fire resistant labels and/or equivalents, and • How to rate an unlabeled container! RMLearningCenter.com

  29. Very Good! Let’s Review! RMLearningCenter.com

  30. Money safes TL-15 & “E” TL-30 TR-30 TRTL-30 TRTL-15x6 TRTL-30x6 Currency vaults 5R 6R 10R Type I, II, III Modular Class I, II, III The Evolution of Security Technology: Underwriter Laboratories Ratings – A Testing StandardInsurance Services Office ISO & The American Society of Industrial Security write “Construction Standards”It’s Burglary “Resistant” NOT Burglary “Proof!” RMLearningCenter.com

  31. UL Record Safes Class A, B, C, D 350 1-2-4 hour 150 1-2-4 hour 125 1-2-4 hour UL Records Vaults 2 hour 4 hour 6 hour Doors should equal the fire resistance walls, ceiling & floor! The Evolution of Security Technology: Underwriter Laboratories Ratings – A Testing StandardInsurance Services Office ISO & The American Society of Industrial Security write “Construction Standards”It’s fire “Resistant” NOT fire “Proof!” RMLearningCenter.com

  32. The Evolution of Security Technology: Automated Teller Machines“A Story of Evolution from the 1920s” • Night Deposit Boxes • Fish and trap resistant chute • Dual locking container • ATMs & High Velocity Cash Dispensers • Business hour • 24 hour level #1 • 24 hour level #2 RMLearningCenter.com

  33. Risk Management fundamentals – continued..Please define and explain the following: • Door, lock, window, hinge-pin, security, • Object, perimeter, and area alarm security, • Internal and external alarm line security, and • On-demand, CCTV, and digital surveillance systems! • Discuss installation, testing, and maintenance standards for each of the above: RMLearningCenter.com

  34. Risk Management fundamentals – continued..Please define and explain the following: • Embezzlement and “internal dishonesty,” • Scams and “external fraud,” • Fictitious & unauthorized loans, • Separation of duties, • Reverse Tracing, • Transaction authentication, • Positive account verification, • PIN & PAN controls RMLearningCenter.com

  35. Risk Management fundamentals – continued..Please define and explain the following: • Dual-control procedures, • Dual access controls, • Key codes, • Statement analysis • Chip & Pin technology • CVV & CVC • CVV & CVC #2 • Controlled Member Account Verification RMLearningCenter.com

  36. Risk Management fundamentals – continued..Please define and explain the following: • Cash flow analysis, • Disaster recovery, vs. Contingency planning, vs. Continuity Management, vs. Event Management, • Kiting, • Lapping and withholding deposits, • Cash letters & holders in due course, • Mysterious disappearance, • Spot-check verifications, etc… RMLearningCenter.com

  37. Risk Management fundamentals – continued..Please define and explain the following: • Phishing, • PHarming, • Skimming & refreshing, • Identity Theft, • How to do a back-ground investigation, • How to use the internet to do RM research, • How to do a credit check, • How to trace transactions back to source documents! RMLearningCenter.com

  38. Risk Management fundamentals – continued..Please define and explain the following: • A contract of “good faith,” • Deductibles, • Actual cash value, • Replacement costs, • Extra expense, • Negotiable security, • Barer instrument, • Exclusions and endorsements, RMLearningCenter.com

  39. Risk Management fundamentals – continued..Please define and explain the following: • The three most important points to make when writing an RMA report, • How to defend cash item storage recommendations, • How to submit a “memo to file” or “incident report,” • How to locate physical address for fire department and how to make emergency call, RMLearningCenter.com

  40. Risk Management fundamentals – continued..Please define and explain the following: • The difference between a fire and a bomb threat evacuation, • How to respond to an earthquake, tornado, anthrax scare, and bomb threat, • How to handle an embezzlement suspect, and • How to take command and control of any life threatening incident! RMLearningCenter.com

  41. Risk Management fundamentals – continued..Please define and explain the following: • Duties of an “Underwriter,” • Duties of a “Claims Adjuster,” • Duties of an “Actuary,” • Duties of an “Account Representative,” What do all the above have in common? Hint; They are all Risk M-------s! RMLearningCenter.com

  42. Very Good! Let’s Review! RMLearningCenter.com

  43. Miscellaneous 2% Robbery, Burglary, Theft, Fraud 20% Forgery 12% Faith. Perf. 21% Employee Dishonesty 45% Typical Bond Experience RMLearningCenter.com

  44. Typical Bond Experience Misc. 5% Robbery, Burglary, Theft, Fraud 40% Employee Dishonesty 13% Faithful Performance 3% Forgery 39% RMLearningCenter.com

  45. Suspicious life style Can’t leave or relinquish control Tale wags the dog Overly religious Easily excited Works late and alone Profile of the Credit Union Embezzler RMLearningCenter.com

  46. Profile of the Credit Union Embezzler • Full of Rationale & Justifications • I’m only borrowing, • Others are doing it, • I’m underpaid and overworked, • That’s all I did, I’ll never do it again, • Always has a need & looks for an opportunity. • Knows he can escape or blame others. • You didn’t tell me I was doing wrong, • Has a “character disorder.” RMLearningCenter.com

  47. Profile of the Credit Union Embezzler • Character disorder? • We all have them, • Can’t tell right from wrong, • Seldom admit they’re a thief. • Who can your trust? • Grandma – grew her CU with bogus accounts • Reverend - sold CDs to family and farmers, • Uncle - stole member’s money, home and wife – “The dismembered member” • Are you guarding your inactive and dormant accounts? RMLearningCenter.com

  48. Embezzlers are all On A Path Prison! Most starts small- • Open cash drawer • Common funds • Withhold currency • Lap deposits • Kit using multiple accounts • Manipulate family member accounts RMLearningCenter.com

  49. Embezzlers are all On A Path Prison! • Use dormant & inactive accounts • Transfer funds to accounts they control • Use expense accounts • Hide funds in GL clearing accounts • Collection department fraud • Most find their way to your loan files • Unauthorized loans • Fictitious loans RMLearningCenter.com

  50. Internal Controls“Cash handling procedures” • Audit trails • Dual verification • Signed receipts, computer entries, etc. • Pre numbered cash receipt vouchers • Individually “locked” containers • Combination and key controls • Spare key controls RMLearningCenter.com