Managing Treasury Management service risk is as important as managing credits. There are several TM services that carry credit risk similar as if they were loan facilities to business customers, as well as other risks. Therefore, it is necessary to conduct service risk assessments and also ensure the businesses using these services are credit worthy.

So where do you begin? How do you identify those services and ensure they are used in a safe and sound manner? You ask similar questions as when you lend money to a business customer: Will the institution get paid back once the money is gone? Does this business have the capacity to support the debt in case the transaction is done and there are no funds to back it up? Let’s examine these services closer:

Wire Transfers

This product is probably the highest risk-rated service at your institution. If your employees don’t follow the appropriate policies, processes, and procedures, once you click “submit,” the money is gone. Therefore, it is imperative that your procedures are followed exactly as written to ensure the institution is not liable if the wire is fraudulent. Additionally, the platform used to initiate and approve wire transfers must have multifactor authentication capabilities and authority levels—both at the customer’s site as well as internally for employees to approve based on their own limits. There is Operational, Technology, Compliance/Regulatory, and Credit Risk when extending wire transfer capabilities to business customers.

Automated Clearing House (ACH)

Direct Deposit of Payroll is probably the most common service institutions offer to business customers. However, businesses are increasingly utilizing ACH to pay their bills because of the additional cash flow control and because it’s significantly cheaper than checks or wires. Businesses select the specific date for the batch of payments to clear their account. From the risk perspective, once the batch leaves, the institution can only retrieve the funds within a specified timeframe and following specific ACH rules. If the business account does not have collected funds, the institution is out the money. Therefore, ACH services are similar to an open Line of Credit and thus bankers must approve this TM service as a credit facility. As with wires, there is Operational, Technology, Compliance/Regulatory, and Credit Risk for ACH services offered to businesses.

Remote Deposit Capture (RDC)

The RDC carries the same risks as the other two services, but it works differently. The primary risk with RDC comes from customers potentially depositing the same physical check more than once, and in more than one institution.

Current scanners have technology to identify payee, routing number, account number, check number, amounts, and even the handwritten amounts. However, there is still a possibility of a fraudulent check deposited at different financial institutions within a certain period of time where it is undetected (at least for a few hours before posting to the accounts). Therefore, institutions must implement policies establishing daily and aggregate limits for checks deposited via RDC. The systems can automatically approve any amount, but the institution must approve each business customer up to a certain limit and treat each deposit as an extension of credit.

Unfortunately, many institutions review all checks deposited via RDC for all customers manually after a certain amount determined by the institution’s policy making this service costly and inefficient. In addition, most institutions grant immediate access to the funds deposited via RDC. For these two main reasons, businesses that utilize this product must obtain credit approval before they use it. Most institutions provide the credit approval at the time of making a loan to the business customer. For depository-only clients, the institution provides credit approval even if the customer does not have a loan.

Mobile Deposit

Consumers and very small businesses use the Mobile Deposit service with few exceptions. Mobile Deposit carries the same risks as RDC. The key determining factor as to which service a business should use, RDC or Mobile Deposit, is volume. Only businesses should use the RDC service. All consumers can use Mobile Deposit. However, the daily limits for consumers is typically lower than for businesses.

Managing treasury management service risk is as important as managing credits and is part of the overall enterprise risk management program of your institution. The purpose of this blog is to explain the various risk categories that each of these important treasury management products brings to the institution. Conduct service risk assessments on these services and ensure your institution is mitigating all the risks. In the end, all other risk categories affect your reputational risk.

Businesses expect community banks and now credit unions to offer these services. Otherwise, you are not competitive. Institutions price loans based on risk. The question I leave you with is this: Do you charge for these services especially now that you understand the additional risks your institution takes by offering them?

As always, we are here to help.

Looking for ideas to expand your Treasury Management reach to new business customers? Look into the TMClarity Framework, our comprehensive and transformative training and Treasury Management business management system that leads to greater sales success, higher margins, and increased customer retention in a competitive marketplace.

Increased employee engagement is one of the top strategic objectives for many institutions so we’d like to share six strategies to increase employee engagement. As we facilitate strategic planning sessions for our clients, they often share the concern that their employees are not as engaged as they would want them to be. This topic is important enough to the senior leadership team that we spend significant amount of time discussing strategies to increase employee engagement.

In this blog, we provide six strategies to increase employee engagement. We answer some of the most common questions institutions have about the subject.

What does “employee engagement” mean to your organization?

The word engagement has several meanings. But in the context of employee engagement, it means involvement, commitment, obligation, and pledge. Companies that share the core belief of strong employee engagement want their team members to embrace that important core belief. They want employees to feel like they belong with the company—that they are part of the family.

One main reason why company leaders want increased employee engagement is because engaged employees tend to stay with the company longer than unengaged employees. Employee longevity is a key ingredient in the success of any company because it creates a sense of stability for other employees and for customers.

Strategy #1: Communicate to your employees what employee engagement means to you and why it’s important for them to become engaged. Embrace engagement as one of your core values and communicate it in writing and verbally with all your employees—consistently.

How do you create an environment that invites employee engagement?

Engagement starts at the top. An engaged Board of Directors sets the tone for the rest of the organization. When Directors meet with examiners at the safety and soundness exam exit meetings, it sends a message to the regulators and employees alike that Directors care about the institution. Directors who show up to company gatherings and socialize with the regular staff, communicate that they are part of the team.

Most community banks and credit unions engage with their communities—thus their name “community bank” or “community credit union.” Therefore, employees have plenty of opportunities to also involve themselves in the planned activities. In addition, employees can also serve on nonprofit boards located in their own towns or join the local chamber of commerce. Anything that the organization participates in opens a door for their employees to join in.

Strategy #2: Create opportunities for your employees to engage with you as an organization and with your community. Then communicate to everyone via your Intranet, monthly staff meetings, emails, and every other way you have available, so everybody is in the know. 

What are the benefits of an engaged team?

There are plenty of benefits an engaged team brings to a company. When employees engage with the organization and with their teams, you experience significantly low turnover. Often employees don’t leave a company because their friends are there. Other times, they truly enjoy the community activities the organization supports. In addition, employees stay with their employer when they see a career path for them and a future with the company.

Employees who are involved and committed benefit too. When employees engage with others in the company or participate in the community, they make lifelong friendships, get to know their coworkers, and learn new skills.

Strategy #3: Make a list of all the benefits that employees gain from being engaged with the company and communicate it to them. Emphasize not only that employee engagement is a company core value but also what they gain personally by being engaged.

How do you change the culture to inspire employees to become more engaged?

The Board of Directors and senior leadership drive the culture of the organization. A new employee cannot change the culture. He or she needs to only embrace it. The company provides opportunities for employees to engage internally and externally with the community. However, the employee chooses to get involved voluntarily.

Strategy #4: Increase participation at the top. The leadership team must be engaged themselves—with the company and with one another. Create new opportunities including internal committees for employees to lead and communicate to all staff.

Strategy #5: Enhance your Talent Management Program by establishing career paths, leadership development, and clear ways for employees to get involved. You communicate these activities to all staff through demonstration and sharing verbally and in writing.

How do you motivate unengaged employees even when you provide plenty of opportunities?

Unfortunately, there are people that no matter what you do as a leadership, they won’t get involved. They have the right to not get involved nor engaged. With those employees, you need to respect their decision and understand that precisely because they are not engaged, they may be the ones to leave the company sooner than later. Let them go.

Strategy #6: Hire the right people from the start. During the interview process, ask the right questions to ensure employees are willing and able to participate in company and community activities. Communicate that you expect them to become engaged from the start.

I hope you noticed the theme to communicate with your employees your desire and expectation for them to engage with the company’s internal activities as well as the community you serve. Implementing these six strategies to increase employee engagement allows you to create a culture of engagement.