Plansmith Blog

The Real Reasons to Outsource Your IRR

Posted by Dave Wicklund on 10/15/19 11:01 AM

As you grow, your organization has more and more things to manage.

  • Strategically, you’re working to find the right markets to penetrate with the ideal products and services.
  • Financially, you’re making sure your earnings are meeting or exceeding targets.
  • And organizationally, you’re looking for the right talent to expand and grow.

One thing you can’t ignore is the role Interest Rate Risk plays in the banking industry today.

IRRVideo

Click here to watch the rest via video, or read on.

As a Former Senior Bank Examiner and Capital Markets Expert for the FDIC, I’ve seen how critical it is for banks and credit unions to be prepared for audits and exams, and the truth is, many simply don’t have the experience to confidently handle it internally.

The risks for your organization can be significant.  Responding to exam criticisms is a tedious process, and increased oversight or regulatory enforcement actions could be costly. 

At Plansmith, we’ve seen four major reasons to outsource Interest Rate Risk processes:

  1. First, you save time. How many hours does your team spend developing and running models, gathering files, building reports, trying to come up with supportable assumptions, and preparing for exams? Outsourcing your IRR Modeling, Assumption Development, and documentation saves you valuable time that is better spent elsewhere.

Plus, by getting it right the first time, you reduce the risk of spending time on responses to exam criticism.

  1. Second, you could actually save money. When you look at modeling software, you’re likely already spending a good amount of money. But, then add to it the salary and benefits cost of all the time you and your employees are spending on developing and documenting assumptions, gathering monthly files, updating the model, reconciling errors, running reports, trying to figure out what they’re telling you, or why the results are different than what you had expected.

With outsourcing, you’ll know what your costs will be, and you won’t have to worry that time spent on all these tasks gets out of control.

  1. Third, with the right partner, you could dramatically increase your IRR expertise. Just keeping up with trends in compliance is a full-time job. How many community banks and credit unions can afford to have someone solely focused on interest rate risk? Or hire someone with decades of experience dealing with it and regulatory exams. Trusting someone who is already wearing multiple hats to keep you compliant leaves you in a risky position.

Outsourcing could give you the partner you need for interest rate risk management. It adds years of expertise to your team without going through the process of hiring for it.

  1. Finally, you get what you desperately need: increased confidence in your model results. Even with an internal employee or staff running models, a lack of experience could lead to mistakes. Protecting your institution from exam criticisms is an important step towards focusing on the other things you must manage.

Outsourcing to an experienced professional gives you additional confidence that your model results are correct, and that your regulatory exams will go smoothly.

If you’re considering outsourcing your Interest Rate Risk Management, look no further.

At Plansmith, we have more than 35 years of experience working with thousands of banks and credit unions to give them reliable analysis and risk reporting.

As Director of ALM Advisory Services, I help institutions every week with Modeling, Assumption Development & Documentation, Backtesting, and a variety of other services to help them save time, save money, add expertise, and increase confidence.

If you’re ready to find out how outsourcing could help you, schedule a discovery call.

We’ll identify the ideal solution and get you the reliable ALM analysis and support you need so you can mitigate interest rate risk and meet regulatory expectations.

Topics: community bank interest rate risk, interest rate risk management, IRR, bank irr reporting, Outsource IRR, credit union planning, asset liability management

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