Who in your community bank should be using planning specialty software? Accounting, the Board, the ALCO? You might be surprised as to how many various areas/departments and their respective managers should actively use and benefit from an automated planning system.

What are the various functional areas and departments that should be actively involved in planning at your community bank?

• The Asset Liability Committee – The ALCO
• Investments / Funds Management
• The CFO
• Branch/Department Managers
• The Marketing Department
• CEOs and Directors

Let’s discuss what the planning responsibilities and software opportunities are for each person/group.

The Communtiy Bank ALCO:

Responsible for the measurement of interest rate risk inherent in the balance sheet, determining the appropriate actions to control that risk, and maximizing return.

Involvement in the planning process is a natural for the ALCO because of the data capture needed for rate sensitivity analysis, including rate shock of margin, market value calculation and shock simulation. Yet there is so much more to benefit from. We strongly suggest that the ALCO bring the model into the meeting, so to interactively discuss and immediately test ideas with measureable results. These tactics should also be documented allowing the ALCO to emerge with an action plan at the meeting’s conclusion.

Investment / Funds Management Department:

Responsible for controlling the company’s interest rate risk, providing liquidity, and optimizing the total return on the investment portfolio.

This department can benefit from reports that feature Total Return, Duration and Market Value confidently because of the models ability to simulate the various types of instruments the institution currently has, as well as those it is considering in its future. Models should be used by the investment officer to compare portfolio strategies and measure risk today, or future parallel or non-parallel yield curve shifts.

The Community Bank's CFO:

Responsible for preparing of annual budgets and profit plans, and consolidating information for the financial statements to the Community Bank's President/CEO and the Board of Directors.

A planning system should easily update with current financial information including balances, income and expense data, yields/costs, and maturity data from the loan, deposit and investment areas of the company. This then becomes the platform for accurate performance tracking allowing for testing what-ifs, and re-forecasting based on existing challenges.

Check back to read part two of this series to discover how Branch/Department Managers, the Marketing Department, and CEOs/Board of Directors are involved in the planning process.