Approaching a significant milestone like $10 billion in assets comes with internal and external pressures that can test your bank. Addressing the strains of meaningful bank growth requires shifting approaches to continue to manage the business effectively and to accommodate new challenges.
When banks approach this milestone, big changes are on the horizon. New strategies can help them meet looming challenges, particularly in these three vital areas:
- Regulation. One of the biggest challenges a growing bank will likely face is becoming subject to new regulations and regulator expectations. Knowing about the Durbin amendment is one thing, but preparing for new expectations operationally within an overall compliance management system is where the real challenge lies.
- Risk management. Operations are set up to handle risk, but tolerances, programs, and structures change drastically as banks approach $10 billion. Continuing to assess and act on risk means developing a fresh outlook.
- Threats. Challenges grow with size, and growth comes with additional layers of complexity in regulatory expectations, fraud and cyberthreats, operational risk, and expectations for environmental and social governance. These events can have a serious impact on profitability and bank growth.
Understanding mistakes banks often make on the way to $10 billion in assets can help your organization prepare for challenges. Common missteps include:
Read our quarterly report or reach out for a 90-day assessment.
Crowe has studied the business models and practices of high-performing banks preparing to cross $10 billion in assets.
1. Not interlinking vital systems
Regulatory agencies often follow banks more closely as they grow larger, and regulators are looking for verification that process management is under control and can handle increasing scale, velocity, and complexity.
To demonstrate that process management is up to speed, business systems and operations should feed into risk management and compliance monitoring programs across the bank, with coordinated first, second, and third lines of defense. Every bank employee, from the CEO to staff, must understand how risk management is everyone’s job and how their actions and decisions affect customer service, competitiveness, efficiency, and risk mitigation.
2. Not properly updating processes
As banks grow, processes should mature at the same time. Added formality is a hallmark of a properly growing system evolving beyond a dependence on sheer employee effort with spreadsheets and memos.
It’s never too soon to start evaluating current systems and identify opportunities to upgrade program management practices. Processes should cohesively support efficiency, regulatory compliance, and risk mitigation to help prepare for the $10 billion crossover. Improving processes might also help banks get there sooner.
3. Not educating employees
Successfully shifting bank operations hinges on employees’ ability to operate within new expectations. In many instances, banks aren’t just adjusting the way people do their jobs. They’re empowering them with knowledge of their roles in the bank’s success and showing them how they can benefit from changes.
It isn’t enough to tell first-line personnel only once that they affect risk management or blithely mention to the second line that they are an important part of oversight. Effectively instilling in employees how everyone contributes to ongoing bank growth takes practice and consistent reinforcement over multiple quarters.
4. Not staffing for growth
A loyal bank staff is essential. However, recruiting seasoned hands can also make a sizable difference.
Experienced talent who have worked with larger, more complex and demanding organizations can help your bank prepare for growth while maintaining key aspects of its historical culture. Gradually integrating new and experienced talent over time is essential in shoring up gaps in knowledge and expertise that can be expected as a bank grows.
5. Not hitting the mark on preparation
Asset growth can sometimes come more quickly than expected, and all these necessary changes can’t happen overnight. When an organization only budgets for incremental advancements, it can be hard to create a blueprint for the future.
Banks can benefit from having a strategy and budget in place. They should revisit the plan over time to make sure they’re on track and that it still aligns with their goals. Contingencies, situational triggers, and requirements will help the bank stay on course as the longer strategies unfold.
Crowe has studied high-performing banks and has witnessed the missteps some have made on their way to $10 billion in assets. We can help you identify your potential for self-investment and prepare for the future.
Read our quarterly report to better understand what contributes to high performance in your asset segment or reach out for our enterprise deep-dive 90-day assessment to help your team prepare for the tremendous opportunities that lie ahead.
Crowe knows what makes a high-performing bank, and the potential issues that come with bank growth that can affect profitability.
