Governance Over Risk Management in Large or Complex Credit Unions

Managing risk is fundamental to the activities of a credit union.

Risk management involves understanding, analyzing, and mitigating risk to enable a credit union to achieve its objectives, while also managing risk in proportion to its ability to absorb potential losses. Risk management is a continuous process that supports the development and implementation of the credit union’s plans and strategies.

The level of risk oversight is based on credit union size, complexity, and financial condition. Credit unions with lower-risk profiles may achieve oversight through layered management committees. As the credit union grows its assets and complexity, or engages in higher-risk activities, best practices may include developing an independent risk oversight function.

An effective risk management program addresses material risks associated with the credit union’s activities and is integrated into the credit union’s culture. Ideally, a credit union’s leadership (board of directors and management team) establishes and follows policies and procedures that provide for independent and objective risk analysis. The culture supports accountability and performance measurement and promotes operational efficiency at all levels. Establishing an appropriate risk governance structure through management policies and procedures creates risk awareness.

This section of the Examiner’s Guide is specific to the governance over risk management in large or complex credit unions. It addresses:

• Risk Management

• Risk Management Components

• Risk Governance Framework

• Enterprise Risk Management

• Examination Procedures

• Workpapers and Resources

Last updated on August 23, 2022.