LOMBARD, Ill.-Better loss forecasting and deeper member relationships are two big benefits of the recession, according to Bill Handel.

Either due to regulation, or CUs not wanting to face significant problems again, the industry will soon begin employing better loss forecasting methods, stressed Handel. The VP of research and development for Raddon Financial Group told Credit Union Journal that CU loss forecasting has in the past been, in an unfortunate oxymoron, primarily a look back, even though by its nature it requires looking forward.

"Loss forecasting in the industry has often been very rudimentary-what do my past losses look like, when were loans written, and how many should I anticipate. Kind of a rolling model. I don't think those models are sophisticated enough."

Handel said forward-looking models take into consideration the credit cycle and the quality of credit that gets written at different points in the credit cycle. "This is something the industry will have to take to heart, because it does not want to get caught with its pants down if another 2008 comes along."

What Efficiency Really Means

Handel also believes that during the recession many CUs woke up about what operational efficiency really means-that big gains in this area come through deepening member relationships, not cutting employees or staffing in new ways. "Credit unions do not cut staff or areas broadly like banks. They only do this when it is a necessity. When you make decisions based on necessity to survive, those are usually bad decisions."

CUs, too, have learned that even though they are not-for-profit they must run the credit union as a business. "They have to pay attention to all levers and have a plan based their own, unique competencies. They need to find what this business model is. Too many got hurt by the recession because they we doing a lot of 'me-tooing.'"

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