Stay Ahead of the Threats of Staff Turnover and Regulatory Oversight

Credit unions are facing historic challenges that make compliance increasingly difficult: high staff turnover and increased regulatory oversight. But a thorough compliance management program can help credit unions manage staffing changes, remain compliant and stay competitive in this complicated marketplace. 

Here’s how.

More Employees Than Ever Are Leaving Their Jobs

The Great Resignation has seen record-high numbers of professionals leaving their jobs for greener pastures. In 2022, an estimated 30% of workers changed jobs—and it appears more have plans to leave jobs over the next several months.  

A Pew Research Center survey found that about one in five workers (22%) say they are very or somewhat likely to look for a new job in the next six months. According to a McKinsey survey, common reasons for quitting include lack of career advancement (41%), inadequate compensation (36%) and uncaring/uninspiring leaders (34%). 

Historic levels of employee turnover have left their mark on credit unions. Talented staff are leaving their roles for new opportunities. Amidst the stress of the pandemic, economic downturn and industry layoffs, many employees with strong institutional experience have opted to retire or leave the industry altogether.

Resignations are made worse by the difficulty of attracting and retaining new employees. Credit unions are having to rethink their salary structures, benefits packages and flexible work arrangements to appeal to new staff. Meanwhile, the employees who remain during this transition may feel overworked and unsupported.

Credit unions, like companies in every industry, must also adapt to the trend of “quiet quitting.” In response to burnout, workers are opting to roll back the time and energy they are willing to put into their work life. Some say this means unsubscribing from the “hustle culture” mentality. Others say it means doing the bare minimum required to perform the job. This trend adds extra pressure to management to ensure their staff is happy and engaged.

Knowledge Drain Exposes You to Risk

High turnover has serious consequences for credit unions when it comes to maintaining regulatory compliance. Long-term team members often have the deepest knowledge of legacy technology systems, especially those that are out-of-date. When they leave, newer team members may lack the training or experience to navigate these systems. This is a critical issue when legacy programs are your main compliance management databases.

Compliance information stored in disparate locations is easily lost during turnover. In some cases, credit unions have one person functioning as an institutional encyclopedia. When that person leaves, they take key knowledge with them. Policies, procedures and other key documents may be on paper, in file folders or drawers, or on hard drives across the institution, without a clear organizational system. New staff may have a difficult time locating or understanding the file structure of a previous employee. 

These gaps in knowledge and information sharing expose your credit union to risk and potential compliance violations.

Increased Regulatory Oversight

Increased staff turnover can be particularly difficult and costly for credit unions during the current era of increased oversight. According to a recent study from Deloitte, the cost and complexity of compliance have risen over the last decade, with more rules expected ahead.     

The current administration’s latest report only confirms this point, calling for further regulation of partnerships between fintechs and financial institutions. In particular, the report notes the increased risk of consumer protection, data privacy and regulatory arbitrage posed by fintech-financial institution relationships. Credit unions will likely face additional scrutiny from U.S. agencies, particularly around their vendor networks.

Finding Balance

While staffing challenges and increased oversight do present significant hurdles for credit unions wanting to stay compliant, there is some good news. A thorough compliance management program can help your institution not only manage a complex network of laws but create a proactive plan that transcends staffing and other internal changes.

A compliance management program is a comprehensive assessment of organizational risks and concrete processes to address them. It’s typically comprised of five elements:

1. Risk assessment. Identify relevant regulations in the markets your institution operates in; determine potential non-compliance risks and how to address them.
2. Culture of compliance. Create internal policies and procedures that will help you maintain compliance (e.g. strong know-your-customer processes), including needed record-keeping, staffing and technology.
3. Training. Provide education to staff at all levels of the organization through training sessions, written resources and open lines of communication.
4. Reassess. Regularly review your credit union’s compliance plan. Have there been compliance violations? Are staff confident and capable of following regulations? Locate any areas where your organization can improve, and update processes and training as needed.
5. Internal audit. Perform internal audits to prepare for any interactions with regulators.

Filling Gaps With Technology 

One area where credit unions may struggle to thoroughly execute their compliance management program is keeping up with the incredibly complicated network of thousands of federal and state laws. These laws constantly change or are updated or expanded to cover new aspects of the financial services industry. Many credit unions, especially those short on staff, may find manual compliance review difficult if not impossible. This is where software comes into play.

Many credit unions are now incorporating a compliance management system into their programs. A CMS helps organizations manage their compliance activities in one place. They often contain regulatory libraries, document storage, reporting capabilities and workflow tools—all of which help the organization stay compliant and exam-ready. A good CMS will monitor portfolios and identify specific risks so credit unions can address any issues before auditors get involved.

They have many benefits for both helping credit unions keep up with regulations, manage staffing changes, and support their compliance management program.     

Meeting Today’s Challenges

Credit unions have much to contend with this year. Between ongoing staffing challenges and a likely increase in oversight, maintaining a thorough compliance process may seem daunting. But ensuring your organization sticks to a thorough program, whether that involves staff training, regular audits or software solutions can help you stay sustainable in the long run.     

Rafael DeLeon is SVP/industry engagement at Ncontracts, a leading provider of integrated risk management and compliance solutions for the financial services industry. An expert in risk management, governance and regulatory compliance, DeLeon leads educational initiatives, thought leadership and industry outreach at Ncontracts.  Before joining Ncontracts, he spent 32 years as a bank examiner, including directing the Office of the Comptroller of Currency's outreach and director training programs. He is a director at MainStreet Bankshares in Fairfax, Virginia.