Ten Benefits Your Bank Can Enjoy from Having a Complete ERM Program

“I can’t give you any feedback on your ERM Program. You’re the only small community bank that at $250MM in assets, has a complete ERM Program. Keep doing what you’re doing.” Those were the words of my FDIC examiner when I presented to them my first complete ERM program for the bank I helped start. At that point back in 2012, the bank had just reached the $250MM asset size and was about seven years old. During another conversation, my FDIC examiners told me that the bank “had a strong foundation and a solid infrastructure.”

As the CFO & COO of the bank and later as the CRO, those words made me feel good and I can tell you I slept well the almost ten years I spent with the bank from inception until I left to start Malzahn Strategic. However, those words also left me with the feeling that I was on my own, with very little guidance to continue developing the ERM Program. The lack of guidance is precisely one of the main reasons small community banks are not ready, nor able in many cases, to create a complete ERM Program. The other reason is because creating an ERM Program is not, at least not yet for small community banks under a certain asset size, a regulatory requirement.

I would never want more regulatory requirements for banks. Instead, I strongly recommend that community banks under $500MM in assets establish a complete, yet simple, ERM Program. There are several ERM software packages available. However, they are too expensive and too cumbersome for small banks to use. They simply don’t have the time, resources, internal expertise, or the energy to devote to such programs. But small community banks don’t have to use those sophisticated and intimidating software packages. What the regulators want is for banks to know all their risks, put mitigating factors in place, and be aware of the residual risks they have in every area of the bank. Regulators want to know that you know your story from the risk perspective.

Even though credit risk is one of the biggest risks for banks, they now also have to focus on other important risks such as technology and operational risk. Unfortunately all the risks are interrelated. If one high risk area is affected, the ripple effects flow to the other risk areas such as capital, earnings, legal, or reputational, for example.

There is the perception that creating a complete ERM program is monumental and banks then tend to focus on certain pieces such as Cybersecurity, or Compliance, or the Disaster Recovery Plan, and they are not looking at the “enterprise-wide” approach. They are missing opportunities to make their bank the best it can be. They are missing all the benefits of having a complete ERM Program. So today I would like to share some of those benefits:

  1. Establish best practices enterprise-wide. When you create an ERM Program, it forces you to look at your entire organization and many of the practices that get implemented are best practices that will help the bank overall, not just to mitigate a specific risk.
  2. Increase efficiencies. The same way, as you establish new best practices, you find other ways of doing things and, as a byproduct, your bank becomes more efficient. Efficiency ratio is a key measurement of profitability and most banks are looking for ways to become more efficient.
  3. Establish an ERM process. One of the best practices that you should establish is an “ERM process,” which means now you have a process to run new ideas through. For example, if you are thinking of adding a new division or a new product, you answer a series of questions such as “What are the new risks the bank will have by adding this new division or product?” and “How are we going to mitigate those new risks?” “Is the reward worth the new risks?” Going through this process will eliminate not only new unnecessary risks, but will also save your staff valuable time wasted on new products or divisions that may not be profitable for your bank.
  4. Build the team. One of the best results of creating an ERM Program is creating an ERM team. When I created the ERM Committee, I carefully selected one person from each area of the bank to represent that area and to bring their opinion and expertise to the table. This practice not only helped create a complete program but it also built the team like nothing had before. Now each team member learned about other areas of the bank and learned the importance of each of those areas. They also saw how the entire bank worked as a whole, as one company. That was the most rewarding experience I had during this process.
  5. Create awareness, enterprise-wide. When you establish an ERM program across the organization, employees learn about other areas of the bank and become aware of potential risks the company may encounter in the future. The program, as a byproduct, creates a “risk aware” culture. Everyone is looking out for the good of the company.
  6. Opportunity to assess risk, enterprise-wide. The process of conducting a risk assessment organization-wide, uncovers risks that most owners/leaders had not thought about in the past. As you put in place mitigating factors, and educate the staff, you improve processes across the board and are able to eliminate some of the risks.
  7. Prepare for the future. There is nothing like knowing your current risks and potential new risks to help you prepare for the future. The process of testing your processes, current systems, disaster recovery plan, or business continuity plan, opens your eyes to be prepared for the future.
  8. Create accountability. The ERM committee meets with regularity through the year (even as little as quarterly) and committee members have an on-going list of monitoring and reporting tasks. Results of testing, running new products through the ERM process, and the reporting to the Board of Directors, creates continued accountability within the organization.
  9. Educate and involve the Board of Directors. Very few banks have completed a Board Risk Appetite and Tolerance Statement. But this is a very important step to complete. This is the summary of all your bank policies along with the level of tolerance/risk you’re willing to take in the various risk categories. From here, you can sound the alarm when your bank is approaching the high level of tolerance in the various risk categories.
  10. Create a sound infrastructure and a solid foundation. Putting in place a complete, yet simple, ERM program, in the end creates a sound infrastructure and a solid foundation upon which your bank will grow into the future.

Okay, there were eleven benefits but the “Ten Benefits” sounded better for the title!

Tell your story from the risk perspective. Once your ERM program is complete you will feel equipped to tell your bank’s story from the risk perspective—not just the credit risk perspective but from all potential risks your bank could possibly be faced with now and in the future.

These are some of the great benefits that your bank can enjoy from implementing a complete, yet simple, ERM program. At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management.

Know Your Value

Early this year, I spoke at Encourage Her Network, a women’s networking group that focuses on promoting and connecting women in business. The topic was “Know Your Value.” When Shannon Johnson, founder of Encourage Her Network, gave me the title for their Signature Event, I was immediately inspired because it meant two things to me. First, the title implies that each person is valuable and second, that each person needs to know their value.

As the keynote speaker, I felt the responsibility to remind the women of how valuable they are and also to tell them why. So I decided to focus on four key areas:

Know Your Value as an employee, as an employer, as a leader, and as a person.

But before I get into each of those areas, let me describe the word “value” and “valuable.” The Webster’s Dictionary defines the word “value” as s a noun to mean “relative worth, merit or importance; monetary or material worth.” As a verb, value means “to calculate the monetary value of something, to consider with respect to worth, excellence, usefulness, or importance, to regard or esteem highly.” So what determines if something is valuable? In regards to material things, it’s what people are willing to pay for the specific item, product, or service. In regards to people—every human life is valuable.

Each person has gifts and talents—a special natural ability or aptitude, what comes easy for a person to do. It’s important for a person to discover his or her gifts and recognize that every gift is valuable. It is also important to recognize the gifts and talents that others have. Then people can be ready to share their gifts with others and also learn to humbly ask for help when they need talents they don’t have. Why is it important to know your gifts and talents? Because each gift is valuable!

Know your value as an employee: Following the concept that each person has unique gifts and talents, it is easy to see that you, as an employee, bring your unique talents to the organization you work for. You bring your contribution to the team and also your individual potential to grow with the company.

Know your value as an employer: Many of us have the opportunity to be in management and leadership roles as well as owning your own business where you hire people. As an employer, you have a great opportunity to discover the gifts in the potential employees of your company and put them to use to fulfill the vision of your organization. Hiring people is a great privilege and you should not take it lightly. Also, as an employer, you bring value to your community by offering your products and services and thus you are contributing to society.

Know your value as a leader: Not everyone is a leader. Leadership is a gift and it should be taken seriously. If you are in a position of leadership, are you using your gifts to further the vision of your company? Are you leading others by helping them discover their own gifts? These are good questions to ask yourself that will help you recognize how valuable you are.

Know your value as a person: Why is it that we need to be reminded that we are valuable? We forget because we don’t hear it enough from others, not even from those who love us. So today, I want to remind you that you are unique. You are valuable! Knowing that you have value and that you, as an individual, are valuable is not just positive self-talk. It is a fact that you need to embrace. Once you know that you are valuable, your self-confidence will increase and you will be able to help others find their value too. You will become a stronger person and will inspire others to succeed in life.

I’m going to add one more area:

Know your value as a Latina leader: As Latinas, we have a special gift of a second language and also our heritage from a Latin American country. We bring our culture and flavor wherever we go and we must take advantage of that by creating awareness and sharing it with others. When I first came to the United States, I wanted to “melt in the melting pot.” That is fine but there was a point that I was forgetting my Spanish. Then I realized that speaking Spanish is a gift and that I must not lose it. Now I value it and appreciate it.

So today I want to encourage you to Know Your Value as an employee, as an employer, as a leader, and as a person—and as a Latina woman. You are unique. You are valuable!

This article was published on the LatinoAmericanToday newspaper at www.latinoamericantoday.com, March, 2016 edition.

The photo is a painting done by my sister and artist, Isa Tyler, called "Happy Flowers" and it's included in my book The Friendship Book.

Kigali, Rwanda, Africa! Volunteering – A Waste of Time or an Amazing Opportunity?

Originally Published on August 23, 2016 on LinkedIn

Wow… I never thought I would go to Rwanda as a volunteer or for any other reason. But I just returned from Kigali and experienced my first mission trip in Africa. I spent eleven days there as a volunteer and my “mission” was to teach on leadership and discipleship topics at a pastors conference and then at a women’s conference. I also shared my personal testimony with the people in Rwanda. What an amazing opportunity this was and an unforgettable experience. If you want to read more about that specific experience, I invite you to visit my personal blog at www.marciamalzahn.wordpress.com. For now, I simply want to encourage you to volunteer somewhere. Help someone. Use your talents to help others. You will be blessed in more ways than you know. Trust me. It won’t be a waste of time. It will be an amazing opportunity!

Here is the article that was just published in the www.LatinoAmericanToday.com newspaper that I would like to share with you through LinkedIn as well:

Do you want to join our Board? That’s a question you don’t hear every day but it happens often when people see you have a heart to help others—especially in the nonprofit world. Twenty three years ago I joined the first nonprofit Board as a volunteer. My first position was Education & Training Chair for Financial Women International (FWI), a nonprofit association with the mission to empower women in the financial services industry. A few months later, the Treasurer resigned due to family health issues and I was asked to step up into that role even though I had just joined the Board. I gladly accepted because I love working with numbers and I saw it as a great opportunity to get to know the organization better. I served in FWI at one position or another for the next sixteen years. I was elected President of the local chapter twice and served even at the National Board level as a Director.

During my time volunteering with FWI, I made lifelong friends and business connections that are still alive today. I also received formal training on the Roberts Rules of Order, how to conduct effective Board meetings, and how to lead a nonprofit association made out of only volunteers. I learned to work in teams, hired speakers for our programs, and wrote monthly newsletter articles. In short, I learned the “soft skills” leaders need in order to be successful. Unfortunately, FWI is no longer in existence because organizations stopped supporting their members across the country starting in the ‘80’s through early 2000’s until we had to close it down in 2009, after existing and serving members for 88 years.

While I was the President of the Downtown Exchange Group leading 133 members, I completed the Management Certification Program they offered by reading several books and attending programs on the topics of management, leadership, negotiation skills, mentoring relationships, and many other important subjects. At the end of my term, my manager at the bank (where I was working at the time) came to my office and said, “Marci, let’s talk management.” She said that because of my willingness to volunteer to lead the association and because I had obtained the Management Certification through FWI’s Program, she felt I was ready to lead the bank’s branch, downtown Minneapolis. I was surprised to be asked since I had never supervised anyone up to that point (and I still didn’t have my college degree) but was very grateful for the new opportunity.

During my time at that bank I also volunteered to participate in the annual Juvenile Diabetes Foundation fund raising effort. My strategy was to ask all the senior executives and owners to support me so I could raise the most amount of money and win the contest. I won. The reward was dinner with the owners of the bank. Because of my willingness to volunteer, I was now being recognized and became more visible in the organization.

Since I started volunteering on Boards I have made my individual contribution of “the four T’s”: time, talent, treasure and touch (connections). Each nonprofit organization I’ve worked with has made a contribution back into my life. We always think that we’re the ones helping them but we receive so much more in return.

There are many ways you can volunteer if you don’t like to serve on a Board. You can volunteer to work directly with the organization’s clients or work behind the scenes to help with the administration or in the warehouse/back room organizing donated items. There are countless ways you can get involved just as there are countless nonprofit organizations that can use your help and talents. The best way to decide where to help is by asking yourself the question: Who do I want to help? Then look for an organization that helps those people and get involved if their beliefs align with yours. Here are some examples of organizations that you could get involved that I’ve had great experience working with:

  • Big Brothers Big Sisters: Become a Big and mentor a child. Participate in their programs so Bigs and Littles can have fun together. www.bigstwincities.org
  • Way to Grow: Volunteer to work with a minority, low income family so their children are ready for Kindergarten. www.waytogrow.org
  • Jeremiah Program: Go with your friends or co-workers and cook a meal for the single mothers and their children. www.jeremiahprogram.org
  • Matter: Volunteer to work in the warehouse categorizing donated items. www.mattermore.org
  • Minnesota Center for Book Arts: Volunteer at one of their events. www.mnbookarts.org
  • Feed My Starving Children: Go with friends or co-workers and volunteer to pack meals. www.fmsc.org
  • Opportunity International: Donate so they can continue to provide micro loans to the poor around the world. www.opportunity.org
  • Shine Ministries: Donate or volunteer so they can bring hope to the world. www.shineintheworld.org
  • Pulse Movement: Donate or volunteer so they can bring hope to the youth. www.pulsemovement.org

By serving on nonprofit Boards I learned how to serve on for-profit organizations’ Board of Directors too. The rewards I have received by serving are many and each has significantly enriched my life. I have never considered it a waste of time. To the contrary, I consider my time invested an amazing opportunity to grow, to learn, and to meet beautiful people across the country (and the world). I now serve on four boards, three of which are nonprofits. I invite you to check out my business website and visit the Community Involvement page so you can get ideas of various nonprofits we support, learn about their individual missions, and start using your talents to serve others. The time to volunteer is NOW. People need your help!

The Power of Connections

Do You Know the Right People? And Do the Right People Know You?

Connections are powerful. From the moment we start relating to people in Kindergarten we start making connections. Some last a lifetime. Others, we only have for a season in our lives. Nevertheless, each person we meet, each connection we make, can help us in the future and we can be of help to them as well. I love to hear the stories of business partners who start by saying, “we were buddies in high school” or “we’ve known each other since we were in elementary school” or “we were roommates in college.”

Every relationship we make throughout our lives is significant. Unfortunately, some relationships leave a negative mark in our lives. But most of them are usually positive. We hope to influence others in a positive way and to help people along the way throughout our life’s journey.

As you grow in your career, you will want to start building a network of other professionals and colleagues whom you trust. You can have different networks of people. There are people you want to have in your network because they could potentially employ you in the future or vice versa, you could hire them to work for you. You may have a separate group of people you network with to brainstorm ideas about your company or the industry you’re in. You will need to be strategic about who you know and also to ensure the right people within your organization and in your industry know you.

People want to do business with people they trust. The best way to get new clients is by word of mouth and a personal referral. Regardless of the situation you’re currently in, I encourage you to grow your network and nurture your existing relationships. Nurtured relationships become more than a connection. Those people can become lifelong friendships, trusted advisers, and future business partners.

Here are some tips to maximize and nurture your network:

  • Find ways to connect with the people you already have in your network. Truly get to know them and take an interest in their personal life. Learn about them.
  • Listen to people’s stories if they’re open to share and respect them when they don’t want to share.
  • Always be willing to share your story. You never know when your story will change someone’s life.
  • Connect people from your network to others. Connections you make will bear fruit. People appreciate being connected and will keep you at the top of their list when they have an opportunity to connect you to others.
  • Schedule time to nurture your relationships. Yes, it takes time to build connections but it’s worth it. You are investing in people’s lives.
  • Be strategic. Plan ahead and find the right people to connect in an organization—whether you are connecting to make a sale or to be hired.
  • Connect people in your network with others. Be willing to share your connections.
  • Invest in creating a professional profile in your LinkedIn account. This is part of your personal brand.
  • Take advantage of networking opportunities in your company, industry events, and conferences.
  • Be genuine. People know when you’re not interested in them.

There are many things you can do to improve and nurture your network of people. It takes time and effort but you will always reap the rewards. Also, the satisfaction of connecting two people who end up working together, starting a new business venture, or simply forming a new friendship is very fulfilling. In business, always remember to make the right connections and ask yourself the question, “Do I know the right people? And do the right people know me?” The answer is within your reach.

NASCAR Racing and Strategic Planning—What it Takes to Win the Race!

Originally Published on June 15, 2016 on LinkedIn

I recently went with my husband and son to Kansas City, MO to watch my very first NASCAR (National Association for Stock Car Auto Racing) race. The experience was amazing and one I will never forget.

In the middle of the race (when cars were going around and around and there were no cautions for about one hundred laps) I got inspired to write this article as I saw a clear analogy between NASCAR racing and strategic planning. Since I had no paper or pen, I typed myself an email on my phone using my middle right finger! Needless to say, it took me a while to type this entire article with one finger yet I thought it was worth it to share with you my observations as a result of this wonderful experience:

  • I pondered on the importance of each race team having a strategic plan that everyone knows and understands. If only the driver knows the plan and the vision then the crew cannot support him (or her). The same way, you can't lead and run a company on your own. You need your crew and they need to know the specific strategies to win the race. Every person in the team has a job to do in order to win. If one lug nut is not tight correctly on the wheel, the car can lose that wheel and will be out of the race. At the minimum, will lose valuable time that can cost the team the victory.
  • The driver is key but is not the most important person in the team. He drives the car but if his car is no good, he, nor the team, are going nowhere...The crew that prepares the car and supports the driver is hugely important as well to win the race. For example, if their driver is in first place and goes to the pit for gas or to change tires and the crew is not fast and accurate, the driver can lose the first place easily—in a matter of milliseconds.
  • I also noticed there is constant communication on the ground amongst the team and between the “spotter” and the driver. The same should happen in a company. The leader needs to communicate with the leadership team and they, in turn, should communicate with the rest of the staff continually in order to keep the momentum going.
  • The NASCAR teams are very organized and do things orderly. They follow rules. Every game, every sport, every team, every industry has rules. The best players follow the rules. They take them seriously because there are consequences and penalties if they violate the rules. In NASCAR’s case, someone can die if they don't follow rules. Even though in corporate America daily decisions may not be life or death, the decisions leaders make do affect the lives of the employees.
  • There are things ahead that only the driver can see or feel. He needs to communicate and alert the crew immediately to come up with a plan of action. For example, the driver may be the only one to notice that something is wrong with the car. At the same time, there are things ahead that only the spotter can see and need to tell the driver to watch for it. For example, if the spotter sees a wreckage and there is a fire, he needs to tell the driver if he can get through the smoke or not. If the driver makes a bad move, he can wreck and completely lose his car and in some instances his own life. The entire team loses—no car, no team. They have to trust each other. The driver's life may depend on it. Again, the same happens in a company. Sometimes the leader sees things ahead and other times the staff sees things that are coming up that could affect the company's performance.
  • You could say the race is not fair. One driver could have the lead for most of the race (even one hundred laps!) and lose at the very last minute because of a wreck caused by one bad move or by another driver that cut him off or hit his car at the wrong angle and sent him spinning off the track. The same happens in life. Your company can be doing excellent for many years and all of a sudden the unexpected happens. One of your key employees leaves, or the market crashes, or a new competitor comes to town. It can be anything and you need to keep in mind that in those moments is when you have opportunities to start over or fix things that have been broken or on hold for a while in your company.
  • I also noticed that if there were no cautions and the cars just went around and around it becomes boring. There is no action or adventure. That's when companies get in a routine and start doing the same thing over and over. The employees become unchallenged, the customers get bored, and the leadership becomes stale. It's time for a change and move things around. Time to introduce new ideas and do things differently.
  • Finishing the race is what matters in the end. There was one car who went to the garage four times and every time he started a lap he had to go back and get something else fixed but he finished the race. In fact, drivers are rewarded with points for every race they finish regardless of how many laps they were behind. What goes on their record is that they finished. The same happens in business. Every time a company tries something new and it doesn't work, the team needs to figure out new strategies to continue the race but they must never give up. They must finish the race.

Even though all the teams want to win and they all have strategies, there is only one winner. Only one driver and one team gets the trophy. Only one driver gets to do the “burnout” after crossing the checkered flag! Sometimes, however, even when you have the best team and the best strategy, life may throw a dart at you and your company and you don't win. In those moments, you need to remember past successes, gather your team, pick up the pieces and with your head up, start over. The most important thing is to never give up and finish your race!

Disaster Recovery Planning – Time Well Invested! I have survived two natural disasters and a war...

An earthquake, a war, a hurricane… I survived those three life events by the age of thirteen. Even though each one of those experiences left a mark in my life, they taught me many lessons and created an awareness that not many people possess. I became very appreciative of everything I have and of every person in my life. At the same time, it created a sense of “being ready” at any time for “what could happen” and what I would need to do to bring things back to normal again.

When I hear a train go by, my memories bring me back to the noise of an earthquake back when I was six years old in Nicaragua. A deep sound from beneath the earth, a sound of destruction. Your home, your office, and everything around you becomes distorted and destroyed right in front of your eyes. Your own life could be gone if you’re in the wrong place at the wrong time. I learned that all your possessions and what you worked so hard to attain can be “torn to pieces” in a matter of seconds.

When I hear the noise of a helicopter, it reminds me of the sound of machine guns in the background when I was twelve years old and lived through the war in Nicaragua. I remember going to bed with the raddling noise of the windows with each bomb that was dropped. They were close to my house and some days it felt as if they were fighting right in my own backyard. The terror you feel when you are helpless, only a victim of someone else’s war, is indescribable. You learn to appreciate life in a new way.

When I hear the sirens announcing the possible tornado coming to your city, it reminds me of the hurricane David I lived through in the Dominican Republic when I was thirteen years old. I observed from a fourth floor apartment about three miles away the waves from the ocean that destroyed the island and the noise of the wind getting through the windows in our apartment. I learned that everything you own can literally “blow away” in a matter of seconds too.

But I choose to look at life from the positive perspective and I’m grateful to God that I’m still here so I can help others in many ways. That’s one of the reasons I founded Malzahn Strategic. The three key things I focus on—strategic planning, enterprise risk management (ERM), and talent management—all have to do with disaster recovery planning. From the strategic planning perspective, you have to put strategies in place to protect your business from ANY disaster and to keep the company safe. From the enterprise risk management perspective, you need to have strategies to mitigate ALL risks that can potentially affect your company. And from the talent management perspective, you need a plan to protect your company from losing your KEY talent, protect it from internal fraud, and also to plan ahead for future talent to bring your company to the next level.

Disaster Recovery Planning falls under your IT Security Program most of the time, which in turn is part of your ERM program. Below is a simple way to start with a Disaster Recovery Risk Assessment:

Conduct a risk assessment based on your business location and probability of any type of incident happening:

  • Threat/Vulnerability (include fire, flood, earthquakes, riots, tornadoes, etc.)
  • Probability of incident (how probable is for this natural disaster to occur in your area)
  • Severability (how severe would it be if it were to ever occur – low, medium or high)
  • Criticality (how critical would this incident be to your business – low medium or high)
  • Confidentiality (this refers to data breach due to a disaster)

Conduct the following risk assessment based on the type of asset and then risk rate each asset:

    • Asset Type: Application/Software, Process, System
    • Asset Medium: Paper or Electronic
    • Vendor Name
    • Controls/Procedures in Place
    • Description of Risks Associated with Asset
    • Risk Mitigation: Description for Mitigation of Risks
    • Risk Rating: Low, Medium, High
    • Criticality to Bank or organization: levels 1 to 5 with 5 being the most critical
    • Residual Risk: Low, Medium, High
    • Information Classification: Public, Non-Public, Confidential
    • Threats/Vulnerabilities: Level of Damage, Type of Vulnerability
    • Threat/Vulnerability Likelihood: Low, Medium, High
    • Vital Resources: Description of Vital Resources to the Bank Operations
    • Recovery Point Objective (RPO): Description of How the Information or Asset Will be Recovered
    • Recovery Time Objective (RTO): Approximate Time of Recovery

Something else to consider is that there are other types of disasters that are not “natural disasters” and they relate to your key talent in your company. I call that “Disaster Recovery for People.” I wrote another article called “Succession Planning – Is It Only for the CEO?” where I urge readers to consider the other key positions in the bank (or company) to have a backup for and be ready in case you lose those employees unexpectedly. Part of the DRP is also to include a Pandemic Disaster Plan. Bank regulators were very focused on that topic several years ago and it should still be part of your plan even if the likelihood of happening in the United States is low. The same way, having a data breach could be disastrous for your company as we all learned from recent incidents at large corporations that suffered a cyberattack. The biggest disaster is your damaged reputation and the financial damage that derives from that as a consequence.

I want to conclude by encouraging you to appreciate everything you have and the people in your life. I also want to encourage you to create a Disaster Recovery Plan for your business and update it and test it annually. We don’t want to live in fear but we live in a world where life happens to all of us and we must be prepared at all times.

Marci Malzahn is a banking executive and founder of Malzahn Strategic (www.malzahnstrategic.com), a community bank consultancy focused on strategic planning, enterprise risk management and talent management. Marci is also an author and motivational/ inspirational speaker. For consulting or speaking engagements you can contact Marci at mmalzahn@malzahnstrategic.com

Does Your Workplace Allow You to Flourish as an Employee?

Do you work in a place where your gifts and talents are not only valued and appreciated but also allowed to flourish? If you are in a leadership position, do you allow your employees to explore and expand their talents?

When employees work in a job where they can utilize their gifts and talents, they grow, have less anxiety, and produce more, which in turn increases the bottom line. The company maximizes their employees’ strengths. Below are some strategies you can use as a manager to create this kind of growth environment for your employees:

Trust your employees that they can do their job. That’s why you hired them in the first place. Micromanaging your employees will only create anxiety and you will eventually lose them. No one likes to be micromanaged!

Challenge your employees with new things where they can use other talents they may not have an opportunity to use in their daily work. Doing this will encourage them to continue to grow and will re-energize them. They will also appreciate that you think of them beyond their job. They are now developing as a person too.

Know your employees at the personal level and learn about their individual strengths. You can use tools like the Strengths Finder 2.0 assessment to help you identify their raw talents that have the potential of becoming strengths. You can also use the Myers Briggs assessment or the DISC tool to help you understand them and help you create an environment where they can grow and flourish. When you get to know your employees and provide additional opportunities to grow, their loyalty towards you and towards the company will significantly increase. Even when employees don’t like their jobs very much, they now have a new reason to stay—new learning opportunities.

As employees get re-energized by learning new things, they also get motivated to continue learning and that in itself propels them to increase their productivity. They can’t wait to finish their daily (routine) work so they can get to the “fun stuff” and the “new responsibilities.”

You will also notice that errors will decrease because employees now feel the burden of loyalty and don’t want to disappoint you as their manager. They want to succeed with the new duties and projects because they feel you trusted them with something different beyond their regular job. They feel special.

Lastly and probably most importantly, you will notice your employees’ attitude will improve and they will be more positive. Employees like to be trusted and want to feel valued.

As an employee, you can also create an environment where you can flourish even when your manager or the organization does not provide it for you. Here are some strategies you can use:

Create new opportunities for yourself and propose ideas. When I was working at Marquette Capital Bank and the online banking product was going to be introduced back in 1995, I saw an amazing opportunity to create a new position. I proposed a new job called, “Online Banking Specialist” and my role was to go to our private banking customers’ homes or offices to load the software (Intuit Quicken or Microsoft Money) and teach the clients how to download their transactions, make transfers, and pay bills. The bank was looking for someone to become an expert on this new product and I was it! My new job was a success and to this day was one of my favorite jobs in banking.

Initiate the conversation. Another thing you can do is to approach your manager and let them know you are interested in doing additional duties even if they are beyond the scope of your job. This tells your manager you are willing to learn and are not afraid to try new things.

Self-disclose. You can also take some of these assessments on your own and then share them with your manager. Most managers will appreciate it and will gain from knowing you better. I understand that most of us, at some point in our working lives, encounter a bad manager who doesn’t “get it” or has no interest in developing his/her employees but those should hopefully be the exception.

As a manager, enjoy developing your employees. You will feel so much more fulfilled and will reap the rewards.

As an employee, enjoy your job, learn everything you can from it while you’re there and explore new opportunities right where you are.

Helping Young Latino Adults Find a Job

You did it! You graduated from college with your four-year degree or a technical/trade certificate. Something that many in your family have not been able to accomplish. Now that you feel “ready to go,” are you truly ready to start your career? Most people work various jobs, usually not career related, while attending college or pursuing their formal education. But now it’s time to pursue the career you invested time in educating yourself.

Besides a college degree or technical certification on a specific trade, however, young adults—and Latinos are not an exception—need other “soft skills” in order to be successful in the business world. I believe there are several elements that an employer looks for in a candidate and there are several things a candidate can do for their resume to go to the top of the list. Most employers, in my opinion and based on my 20 years of experience involved in the hiring process, look for the total package—a person who has the credentials plus the soft skills.

The question is, how do you incorporate the entire package when applying for a job? Let’s first talk about some ideas about improving your soft skills.

Sociability: This skill includes networking, friendliness, a genuine interest in getting to know other people, a good/clean sense of humor, and being a connector of people. Networking and knowing people are still essential for getting employed. Sometimes it may take up to the third of fourth circle of referrals or connections until something works out. Persevering is also key to success. The more connections you make, the more opportunities will open up.

Presence: This is the representation of the package of the total person. It includes your appearance, which in turn includes grooming, stance, handshake, and your entire presence that creates that first impression. Exercising is crucial to staying in shape, which is part of your presence.

Presentation: Part of your presence is your presentation skills—whether that is in a one-on-one meeting, a small group, or a large group in a formal presentation. Being yourself is crucial for people to like you as a presenter. Practicing and preparing are foundational to help you feel self-confident and thus to deliver a strong, successful presentation.

Attitude: Once you get an interview, this is your chance to not only create an outstanding first impression but also to convince the employer you are the correct candidate for the position. Your attitude every day is a reflection of your heart. Your mood, how you feel about yourself, and about life show up on your face, in your tone of voice, your behavior, and how you treat others. As part of your preparation before an interview, think of positive experiences, think of the people you love and that love you, think of places that relax you and give you peace. Remember, these are tips of things to do in addition to what’s expected, which is to research about the company you’re meeting with, bring questions ready regarding the position you’re applying for, dress appropriately for the interview, and show up on time or a little early.

Enthusiasm: If you’re not the type of person that shows enthusiasm and excitement about anything because that’s your personality, that’s ok—most of the time. During an interview, you need to show some enthusiasm about the position you’re applying for and about the company. Share with the employer why you’re interested in working in their company. Tell them about any positive feedback you’ve heard or read about the company. Get out of your comfort zone and get excited about all the things you can learn in the job and in the industry if you worked there.

Once you practice doing these activities and putting these tips into action, you can easily summarize them into a cover letter/email that goes with your resume. The cover letter introduces the potential employer to you, as a person. The resume tells them about your credentials, experience, and accomplishments. Searching for a job is your full-time job until you replace it with the job you want. Don’t give up in looking and trust that there is the right job for you out there!

This article was also recently published on www.latinoamericantoday.com newspaper/e-newsletter. I invite you to read the entire newsletter at http://www.latinoamericantoday.com/LatinoAmericanToday_April2016.pdf.

Got a New Job? Have “Big Shoes to Fill”? Bring Your OWN Shoes!

When we first start a new job, most of us fear being compared to the person who occupied that position previously and especially if it’s a leadership position. For some reason, it is common to compare the previous person to the new one and also to compare ourselves when we are the ones replacing that person. We not only compare ourselves in personality and leadership styles, but also in what kind of legacy we will leave when it is our turn to move on.

In my previous roles as a HR Director for both a nonprofit and a bank, and now as board chair of a nonprofit, I’ve had the opportunity to hire people for various positions at all levels. I have conducted interviews on my own but usually go through the process with a team of people. During those interviews, almost every candidate hears the words, “You have big shoes to fill.” After a while I thought those words could be discouraging to the interviewees. So I started encouraging the candidates to instead “Bring your OWN shoes!”

We are each unique, with our own set of skills, experiences, and talents that we bring to a job. Every person is a unique and different package. So here are some things to keep in mind if you are in transition right now and looking to “fill someone else’s shoes:”

Be authentic. Bring yourself to the interview. Even when you’re meeting with strangers, people you just met at the interview, they can notice and feel if you are not authentic. Being authentic means being reliable, true, dependable, and trustworthy. These character traits show up when employers follow up on references prior to hiring.

Be genuine. Don’t try to be somebody else or act as if you have a second personality when you’re trying to impress somebody. Being genuine means being honest, sincere, open, and candid. During the interview you will have plenty of opportunities to exaggerate your previous experiences, not being honest and sincere about a previous experience, and sometimes you may even be tempted to lie. Don’t. People know and can sense it because, naturally, your body language changes when not telling the truth. In addition, these days information can be verified easily.

Be yourself. As I mentioned above, bring yourself to the meeting. It’s ok to be yourself. The more you know yourself, the better it will be for you to embrace who you are and accept yourself. Discover your weaknesses and strengths and maximize your strengths. Develop your talents so they become strengths. Then, make sure you look for a job that suits your personality, ability, experience, and talents. That’s where you will have the best chances for success. Be ok being YOU!

Be proud of who you are. When you are authentic, genuine, know yourself, and act as yourself wherever you go, people will like you more because you won’t be under any stress to be someone else. List all the things you have accomplished in your life. Remember your previous successes and celebrate. Remember your failures as well and what you learned from them. Be proud that you survived your failures and were able to move on to today.

Avoid comparing yourself to others. The number one way you can make yourself feel bad about yourself is to compare yourself to others. Why? Because you will never be anyone else other than you! And that is okay.

Be confident. When you don’t compare yourself to others, you become more confident in who you are. Self-confidence comes from knowing yourself well, knowing your shortcomings and your abilities. You become more self-confident when you embrace the person you are—physically, emotionally, and professionally.

If you are the person interviewing others, avoid comparing candidates to the previous leader. Instead, focus on the attributes you want the new leader to have in order to take the organization to the next level and continue to fulfill the vision and mission of the company.

If you are the one chosen to fill someone else’s shoes, don’t be afraid. You can do it! That company, committee, HR person, or manager chose you because they saw something in you. They saw potential and want to have you as part of their team. And remember, “Bring Your OWN Shoes!”

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management.

Does Your CIO/IT Leader Understand Your Corporate Strategic Plan?

I love IT people. They are talented individuals who have a gift to understand technology and “how things work” behind the scenes that not many people have. And we also know that their number one gift is usually not communications nor being “touchy/feely” type people. From experience, being married to an IT person, having been an IT Director for a nonprofit and a bank, plus having managed many IT personnel through the years, I have learned how to communicate with them and also how to engage them in the strategic discussions of the organization.

“IT people" as we call them, are very smart people but so are the rest of us. In many corporations, there is a noticeable gap in communication between the top executives and the CIO. This manifests itself in the gap between the corporate strategic plan and the technology strategic plan—if there is one in place. For example, if your organization wants to grow 20% in gross revenues YOY or a bank wants to grow 15-20% in assets in the next fiscal year, do you have the technological infrastructure to support that growth? How soon do you start planning for the continuous growth you are projecting in your strategic plan? What type of infrastructure (both physical and logical) do you need? Do you have the appropriate security controls in place to handle new clients and to offer brand new products or services? Do you have an enterprise risk management risk assessment process in place that incorporates how the new technology will or could impact the organization?

These and many other important questions need to be part of your risk assessment and strategic planning process in order to coordinate and have an integrated IT infrastructure to support your organization. To bridge the gap, therefore, IT professionals need to learn corporate talk, company politics, become very familiar with the company’s strategic plan/goals. At the same time, corporate executives need to learn about technology—not only what systems they need to run their companies but also what type of technology would benefit their company most in order to ensure continued success.

Communication is the crucial component for a successful marriage between IT and the company’s strategic plan. Including the IT Director/CIO (or whatever title you choose for your company’s IT leader), is key to successful communication. Once the IT leader understands the needs of the company, where the company is going, and feels like a valuable team member, he or she will come up with the right technology solutions to support the company. Your IT strategies will then align with the company’s strategies

The IT infrastructure of a company is the foundation of the organization and all the pipes/framework have to be in place correctly—and from the start—just as you build your own home. I used to tell my team, “Our pipes can be full of customers but if our pipes are broken, we’re all going home!” Meaning, the sales staff and processes are just as important as the organization’s infrastructure. We’re all in this together and are part of one team, one company!

The IT Security Program includes having a strong IT Strategic Plan, which in turn should be integrated with your overall company’s Strategic Plan. At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management.

Reverse Mentoring – Do You Need It?

I recently heard the term “Reverse Mentoring” and it caught my attention. We all know what the usual “mentoring” means—an older, wiser, and more mature person “mentors” a younger person. Mentoring can happen in the workplace as well as outside. So what is reversed mentoring? As the word reverse implies, it’s the other way around (my own definition). In this case, a young person mentors an older person. But why do we need reverse mentoring in the workplace? Let me answer that with another question. What does the younger generation know better than the older generations? Technology!!!

When I coach older employees and my Baby Boomer friends in regards to the workplace, I always advise two key things in order for them to be and stay successful in the current business environment: 1) Learn the new technology and stay current with all the changes; and 2) Keep a good attitude as you learn and continue to learn.

Learning new things takes time and effort but in order for the older generation to succeed and have an impact in their later years of work, they need to learn the new technologies to perform their jobs. The problem is, technology changes continually. Therefore, older workers must continue the learning journey. For the younger workers, learning new technology is easy. They were given their first cell phone almost as soon as they could hold a bottle! For them, a new software or new gadget is fun. It’s a new adventure, something to conquer and use immediately in their jobs. This situation creates a huge advantage to younger workers over the older generations.

But it’s not the end of the world for the older workers. It’s not that they’re less smart. They simply have not grown up using all the different technologies. The solution is simply to have a good attitude and open mind to learn the new technology—over and over again. The more your brain gets used to the “exercise of learning,” the easier it is to continue to learn. Did you know the way to exercise the brain is to learn? Just as our bodies need the physical exercise to stay fit, our brains need to continue to learn so they can expand and stay fruitful and productive during our later years.

So, if you are in the “older generation” group, I encourage you to seek a young mentor to teach you the technology your company uses. For starters, believe it or not, one of the keys to being effective and efficient at work is knowing how to type. Many older workers don’t know how to type. Right there, you have a significant disadvantage at work. Most business people these days communicate via email and typing a long note that is important for you to keep in your files or records can take up a long time if you’re not fast and don’t know your keyboard. It’s never too late to learn to type.

It’s never too late either to learn Microsoft Office products and know them well. MS PowerPoint is widely used to create presentations and very few people know how to use it. MS Outlook has many options that few know and take advantage of. Creating a Table of Contents in MS Word is unheard of for most older workers to have this knowledge. Knowing MS Excel is a must for workers in the financial arena. You don’t have to be an expert, just be knowledgeable enough to create spreadsheets fast and know how to use others’ spreadsheets. If you work at a bank, having a basic knowledge of your core system is a must so you can get around and find information easily and quickly—by yourself. These are some of the examples of software packages and systems that you could start learning or increasing your knowledge on so you feel more comfortable and competent in the area of technology. Of course, in addition to the basics, you’ll need to keep up with the aps, your cell phone capabilities, and how to use the Internet and social media.

Older workers will need to humbly ask for help from the younger workers but it will pay off. The young mentor will feel valuable and appreciated. The older mentee will feel smarter and more valuable as well. But on both sides, it will take patience and a good attitude knowing that you are both on the same team. Below is the link to a related article on reverse mentoring by Chris Nichols, Chief Strategy Officer at CenterState Bank that I found to be very informative:


Doing reverse mentoring will also increase the bottom line as older workers can potentially become even more efficient than they are now creating a win-win situation for businesses. Knowing and continuing to learn technology is not for the IT people only. It’s for all of us workers regardless of our age!

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management.

Treasury Management – The Best Kept Secret in Bank Fee Generation!

Treasury Management aka Cash Management is the best kept secret in bank fee generation. Why? Because bankers don’t know these services well and, therefore, are afraid to talk about them. When I was starting my banking career I had the awesome opportunity to be the secretary in the Cash Management area of the bank. Part of my job was to type (over and over) sales proposals for the Cash Management sales team.

One of my happiest days in that department was the day I got my first PC and I had a revolutionary idea—create a Cash Management Manual where the sales team could simply pick out whatever pages they wanted to use on every product to respond to the “RFP’s” (request for proposal). Creating this manual reduced the amount of time I spent typing a proposal from several hours to about fifteen minutes each. And if they changed their mind about a service? No problem. I could fix it or add or change anything within a few minutes. I was the hero of the department!

But kidding aside, from all that typing about each service and during my six years in the Cash Management department, first as a secretary, later as an operations liaison, and then customer service representative, gave me the opportunity to learn about these wonderful products that banks offer. I became very knowledgeable about Cash Management and to this day I remember what each product does, why it’s offered to clients, and how it works behind the scenes—including how banks can make a lot of money in fees!  A few years ago, the term Cash Management was changed (or should we say “updated”) to Treasury Management to reflect the vast number of services offered to help business clients.

What is Cash Management anyway? My own simple definition: Cash management are all the banking services banks offer to business clients to help them handle and maximize their cash on a daily basis.

Below are some of the most known Treasury Management products. I will be writing about each of these products and services in future articles so stay tuned.

  • Account Reconciliation
  • Accounts Payable (AP)/Accounts Payable (AP) Automation
  • ACH Origination Services
  • Armored Car Services/Cash Collection
  • Balance Reporting
  • Business Check Card
  • Business Credit Cards
  • Business Online Banking
  • Cash Concentration
  • Controlled Disbursement
  • Escrow and Sub-Accounts
  • Health Savings Accounts
  • Merchant Credit Cards
  • Multi-Currency Accounts
  • Remote Deposit Capture
  • Remote Safe/Cash Recycling
  • Sweep Services
  • Wholesale Lockbox
  • Wire Transfers

If you are a business banker, you must learn about Treasury Management services. They will significantly increase your bank fees, will bring in deposits to help you fund your loans, and your business clients will be better served. As a result, your bank’s profitability will increase.

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management. We also offer group training on Treasury Management services.

The Power of Mentoring

Originally Published on January 21, 2016 on LinkedIn

I believe in mentoring. It changes people’s lives. You want to make a difference? You want to impact someone’s life? You want to leave a legacy? Mentor someone. January is mentoring month so I decided to share this article I published on the Latino American Today newspaper a few months ago (www.latinoamericantoday.com).

I am not a formal mentor or mentee but I have mentors that, throughout my life helped me in my personal life, spiritual life, and in my career. I have also mentored over 15 young adults during high school, their college years, and while entering the workforce. I helped them with interviewing skills, preparing their resumes, negotiating salaries, getting promotions, connecting them to potential employers, and coaching them through work situations once employed. I also coached and mentored “grownups” when going through transitions at work or switching careers. The little help I provided impacted their lives in various ways.

My mentors helped me get through transitions in my own life, including leaving a ten-year job at a bank I helped start and launching my own bank consulting firm, Malzahn Strategic. I encourage you to look for a mentor, someone who is wiser than you and that can help you become all you can be. Seek for a mentor who wants to share her or his life experiences with you, a person who is willing to share her or his mistakes as well as the successes.

Mentoring is powerful. That’s why I volunteered to be on the Big Brothers Big Sisters of the Greater Twin Cities (BBBSGTC) Board. I started serving four and a half years ago in the Finance Committee, then served in the Executive Committee, and now I serve as the Board Chair. Last year, as I started my two-year term as chair, I pondered about this great opportunity to help lead an organization that transforms young people’s lives forever and now I want to share my enthusiasm with you so you can partake of this experience too.

BBBSGTC is led by my friend and great leader, Gloria Lewis. BBBSGTW is the sixth largest agency in the nation and mentors over 2,000 children. Based on data and research at this agency from 2015, only 10% of Littles and 2% of Bigs in the program are Hispanic/Latinos. Of the 2,000 children (Littles), 56% are female and 44% are male and 58% of the Bigs are female and 42% are males. When measuring development outcomes at this agency, 94% of the youth improved or maintained their scholastic competence, 84% have higher educational expectations, 94% feel more accepted by their peers, and 90% of children mentored increased their motivation to continue their education or job training beyond high school. At the National level, youth that participates in the BBBS mentoring program are 75% more likely to receive a college degree, 46% less likely to begin using illegal drugs, and 52% less likely to skip school.

There are opportunities to get involved and make a lifetime impact in a young person’s life through BBBS. Become a Big and mentor a girl or boy. They are looking for Latinas (and Latinos) who speak Spanish too. If you don’t want to or have the time to be in a formal mentoring program, then do it informally. But mentor someone! It is the best way to give back to the younger generation and to pass on your own wisdom. Mentoring is a way to show the young men and women that they are valuable and that they can too make a difference in the world. As a Latina woman leader, I feel the responsibility to be an example and encourage the younger Latinas that are coming behind me.

As leaders, we need to impart in the younger generation what we learned during our lives and help them prepare to succeed in the working environment. I challenge you to take the initiative to mentor a young girl or young adult and enjoy the journey of seeing a life being transformed right in front of your eyes. Visit BBBSGTC’s website and get involved! (www.bigstwincities.org)

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management. We also help banks establish their community involvement program. I invite you to check out our Community Involvement page (http://malzahnstrategic.com/community-involvement/) so you can read about our giving philosophy and get inspired to become involved in giving of your time, talent, treasure, and touch (connections).

Vendor Management: Do You Really Know Your Vendors?

I would like to continue my post from last week on the topic of Vendor Management and how vital vendors are to the success of every organization. If you missed last week’s article, you can find it in my previous Posts: “Vendor Management is Key to Staying in Business—Any Business!” Through the years I have worked with many vendors of all kinds and I’ve had the opportunity to form long-lasting relationships with many of them. As a best practice and one of the strategies I used when starting the DeNovo bank back in 2005 was to obtain bids from at least two to three vendors who offered the same services so we could choose the right one for the bank. This strategy served us well and we were able to choose, almost 100% of the time, the right vendor for the product or service the bank needed.

In addition to doing due diligence with each vendor to ensure they are the right fit for the bank, to know they will exist long-term, and that they will keep the bank’s data safe, it is also important to form a good relationship with your vendors. As the CFO and COO of the bank, I dealt with all the vendors, which included reading and signing every contract, learning about their services, and protecting the bank at every level. I took that responsibility seriously and considered getting to know the vendors at the personal level of great importance. I dealt with the sales person initially but I also got to know other key people in the company. This proved to be a great strategy when sales reps left the company or my lead relationship manager was promoted to other positions. For example, with the financial auditors, I formed a long-term relationship with the relationship manager/partner, the lead auditor, and some of the staff auditors who came to the bank each year to do the work. I did the same with the compliance auditors at a different firm, the IT auditors, and even with the regulators for the State chartered bank.

It is also very important and a great vendor management strategy to diversify your vendor base. For example, even though I made relationships with various local accounting firms who provide similar services to banks, I chose separate firms to conduct the compliance audits, IT external audits, financial audits, loan reviews, and tax return preparation. This strategy works great when it’s time to rotate firms so they don’t get too familiar with your bank. It is also a best practice for checks and balances within the bank.

As a business owner it is extremely important that you establish professional relationships but also getting to know your vendors at the personal level. Remember they are people too. By having these relationships, you gain favor with them and grace during the hard times. You can also form partnerships when a vendor wants to roll out a new product, for example. You can be a beta test site and get their product for free or at a reduced cost for a while. They may also give you free PR when marketing their new product.

Now as a consultant myself I have reaped the rewards of having all those relationships and, in some cases, friendships. My goal is to provide my bank clients with several options of vendors who provide bank services (with no commissions or hidden agenda from my part). I simply want to be a resource to my clients so they can then choose (like I did when I started the bank) the right vendor to meet their needs. In order for me to recommend vendors to my clients, however, I need to know them and trust them that they will take good care of my clients.

So if you are a banker or business owner, get to know your vendors at the personal level and form long-term relationships because it will pay off. You will benefit from referrals from your own vendors and your clients will benefit as well when you refer vendors to them by having the opportunity to choose the right vendor to meet their specific needs.

Vendor Management is Key to Staying in Business—Any Business!

Vendors—we all need them! Vendors are a crucial component to the success of any business. Vendor Management has become a regulatory hot button for bank regulators. But vendor management applies to any business—for profit or nonprofit, private or public organizations, up to the government. Every company utilizes vendors in order to fulfill their mission as an organization and provide their clients what they need. This is because no one can work alone and not depend on anyone else and not one person or company can do it all. We all depend on each other to survive—locally and globally.

Vendors have the huge responsibility to provide their clients what they promised—to deliver on their brand. Each company also has the immense responsibility to vet and do their due diligence on each vendor they partner with. Every function a company outsources to a vendor is a key factor in the overall success of that company. Therefore, each vendor has to be chosen carefully.

In banking, Vendor Management is part of the IT Security Program, which in turn is part of the Enterprise Risk Management (ERM) Program. At the same time, ERM should be integrated into the bank’s overall Strategic Plan. Banks need to have strategies to mitigate all the risks that come from every area and Vendor Management is one of them. In today’s business environment, however, every company regardless of what they do needs to have a Vendor Management Program in place.

The simplest way to establish a Vendor Management Program is to start with a Vendor Management Risk Assessment. Below are three key components of a risk assessment:

Criticality of vendor to the organization: How critical is this vendor to your operations? Can they be easily replaced? Risk rate each vendor 1 to 5, where 5 is the most critical vendor. Example: your core system vendor is a level 5 in Criticality because a bank cannot run without it. Your shredding company, on the other hand, is a level 1 in Criticality because they can easily be replaced.

Confidentiality of information: What type of data does this vendor have access to (public, non-public or confidential)? What are the consequences if the information they have gets out? Your bank’s core system is a level 5 in Confidentiality because they have access to all your client confidential data. Your shredding company is also a level 5 in Confidentiality because they too have access to all your client confidential data on paper.

Threat/Vulnerability of vendor: Is this vendor financially stable? What are the chances of this vendor existing in the future? If not, do you have a backup vendor to perform this function? The best example I have here is the Accounts Payable vendor we used at my previous bank. The company suffered an irreparable system crash to the point of shutting down the company! They gave us 30 days to figure out how we would pay our bills. Thankfully, we did have a backup company and switched all our vendors/bills to them. However, the pain we went through could have been avoided if we knew this company’s financial state and their disaster recovery plan (or lack of, in this case).

Once you complete a risk assessment, the next steps are to establish mitigating factors, recognizing the residual risk of each vendor, and have a backup plan for each one. The Board of Directors should approve your Vendor Management Program as part of the overall IT Security Program and ERM and it should be documented in the Board meeting minutes. This shows the regulators and auditors you are serious about knowing your vendors and are aware of the risks each vendor poses to your organization. Do not wait until you have a vendor crisis or worse, until your data is out and you face a huge reputational risk. Having a solid Vendor Management Program is key to the success of a bank—or any business!

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. We focus on Strategic Planning, Enterprise Risk Management and Talent Management. Vendor Management is part of Enterprise Risk Management and we can help you establish a solid, yet simple, program. We also partner with vendor management software companies, like NContracts, to help your organization manage the Program on an ongoing basis.

My Biggest Accomplishment as a Manager – It’s Not What You Think!

Originally Published on December 29, 2015 on LinkedIn.

As the end of the year approaches and the New Year is about to begin, we find ourselves going through our accomplishments and making new goals for the next year. I usually ponder on my previous year’s accomplishments and their significance. I ask myself, did I make a difference in the lives of others last year?

When people ask me to share about “my accomplishments in life,” I surprise them with my response because it’s not what they expect to hear. When accomplishments are usually measured by successful companies that a person starts, how many degrees you have attained, or the titles you hold at work, I don’t consider my biggest accomplishment to be any of that—even though I helped start bank successfully, published two books, and have held several C level titles during my career.

As a manager and mentor, the first word of advice I give to first time supervisors is: “Get to know your employees.” Employees are people with feelings, not machines that need to produce to increase the bottom line. When you take care of your employees and get to know them at the personal level, the rest comes by itself. They will perform consistently beyond your expectations. I have a high expectations for myself and for those who work for me. I strive for excellence at every level and try to be an example to my employees in everything I do so I can expect the same of them. And they follow. Because my employees know that I care for them and their families, they don’t want to let me down—I even learn their pets’ names!

In the past twenty years of management, I have laid off employees, fired a few for non-performance, and also promoted all my employees at some point, without exception. I remember, one time I had to lay off an employee who was very nice but we had to eliminate the position. Because the rest of the staff knew how much I cared for the employee, they felt sadder about me having to do the job than the poor employee who was being laid off! But they knew I was hurting for that person. The separation went extremely well and there were no hard feelings. The same situation happened again when I had to fire an employee because of not performing the job well. I was so sad to have to do it but had to because it was the best for the organization. Sometimes we forget that the Human Resources professionals have feelings too and that they (most of them at least) do care about people. That is probably one main reason why they chose the HR profession to begin with.

So, one of my biggest accomplishments in life—and my biggest one as a manager—is that I have never lost an employee because of a bad relationship with me. My secret? Again, get to know your employees as individuals. Invest time in them, nurture the relationship, and have high expectations of them. Believe in them and trust that they can do the job they were hired to do. At the same time, I firmly believe in providing employees with the tools and training necessary to do the job. That is the company’s responsibility to ensure success. If in the end, you do have to fire an employee because of incompetence, at least they will leave knowing that you cared about them. Those employees will leave with no hard feelings which can protect the organization from potential lawsuits. Another thing to remember is, of course, to take all the steps according to the law and ensure proper documentation is completed prior to letting an employee go.

Enjoy being a manager. You have huge potential to influence your employees’ lives in a positive way. Take advantage of that opportunity and develop your employees. Train them and give them career opportunities. Brainstorm with them as to what else they would like to do and promote them if you have the power to do so. They will follow you and will work with you to accomplish the vision of the company.

Improving management skills is part of Talent Management. At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. Talent Management is a key area we focus on as well as executive coaching. By having happy employees, your become more efficient because they’re not wasting their time complaining or looking for other jobs. In the end, good management skills do improve the bottom line.


Succession Planning – Is It Only for the CEO?

When we think of succession planning, we immediately think of the CEO and/or President of a company. And that is crucial to have in place or at least for the Board of Directors to have documented discussions about their succession plan. However, part of enterprise-wide risk management is to think of the entire company as a whole. Community banks face the challenge that because they are small, they don’t have the luxury of having depth of staff. Therefore, one person ends up wearing several hats—sometimes too many. From one perspective, that is a great opportunity for employees because they get to learn about the various areas of the bank and that makes them more marketable. From the risk perspective, however, this situation presents a challenge for banks if that key employee leaves, gets promoted to another position, or simply goes on vacation for a week!

The topic of succession planning falls under various areas of bank management. Succession planning is part of Talent Management, which entails assessing the talent of the organization to see if there are internal candidates to potentially fill key positions within the bank. Talent Management should be integrated into the bank’s Strategic Plan so the bank can clearly see the type of talent needed in the future. At the same time, succession planning is critical to enterprise risk management because if the bank’s leader is no longer there, the bank must have a plan to implement immediately. I call it “disaster recovery plan” for the CEO. But what about the other crucial positions in the organization such as the operations person who has been with the bank for 30 years? What about the employee who knows how everything is done and holds an immense amount of knowledge in his or her head? Who will do their jobs when they move on—whether that’s unexpectedly or planned?

When we work with bank clients on Talent Management, we first identify all the key positions throughout the organization—regardless of title. Then we implement a backup plan for all the critical positions of the bank, which includes cross training employees and establishing procedures that anyone can follow. Having backup and cross training are two strategies that avoid a crisis not only on unexpected situations but also for the planned vacations, so bank operations can continue to run smoothly while key employees are out. The next step is to write the Succession Plan for all critical positions and make it part of your Strategic Plan. Regulators usually ask for the CEO and senior management team Succession Plan but it is wise to also have it ready for other vital positions in the organization.

At Malzahn Strategic (www.malzahnstrategic.com) we work with banks that want to increase their profitability by improving their operational efficiencies. Having a Succession Plan at all levels is crucial to the continued success of community banks.

Small Community Banks Struggle to Offer the Right Technology to Clients

I love technology. I love banking too. Where do technology and banking meet? Simply put, banking without technology cannot exist – both internally, running the bank operations and externally, offering banking products to clients. Everything from running the old fashion teller line simple products like making a deposit into your checking account to making a deposit using your mobile phone is done using technology.

When I first started consulting for small community banks I used to advice to them to offer the most current banking technology products to their clients so they could compete with the large banks. And to clarify, small community banks for purposes of this article, I mean smaller than $250 million in assets. However, as I started visiting banks—especially outside the Twin Cities—I learned that their clients don’t necessarily want or need the state of the art technology, not even some products that have been out for a while. For example, I have a client that has a branch in a suburb of the Twin Cities and another branch up north. One day, we were talking about making sure we offer everyone e-statements in order to increase efficiencies. The employees from the Twin Cities office (including myself) thought it would be an easy sell when the branch manager up north said, “Wait, my customers don’t want e-statements. Some of them don’t even have online banking. In fact, they look forward to coming to the bank to pick up their statements. There is no way I will be able to put them on e-statements.”

There was another incident where I was encouraging a bank to sell remote deposit capture to their business clients when they stopped me and said, “We only have one client who may probably want to use this product so we don’t think it’s worth it for us to invest in it.” So after several incidents like these ones, I have changed my perspective on technology and what small community banks should offer their clients. Now I advise them to offer the technology products that their clients want and/or need based on where they are geographically.

Having said that, I still strongly believe that community banks should strive to keep up with technology in two areas: 1) internally: so their employees have the best and most efficient way to do their work and serve their clients while keeping their client data secure; and 2) externally: offering the banking products that most large banks and other community banks offer so they stay competitive. My hope is that community banks don’t use the excuse that their clients don’t want or need the technology to stay behind the times.

For the community banks that have branches in the cities as well as in the rural areas, they struggle with the balance of offering the most up to date banking products, which cost money to implement and keep safe. But they have no choice. Due to their geographical locations, they must offer all the choices to their varied clientele in order to stay competitive. They have to take the risks and added expenses of implementing new technologies or the risk of losing customers (or not growing) by not having it. Once again small community banks struggle making the right decisions to stay alive and succeed.

My advice is to take calculated risks based on what your customers are asking you. Know your client base, do your research (meaning, know what the cost of implementing the new bank products is, who wants it, which clients are asking for the new products, charge accordingly, do a risk analysis on the new products so you know how to mitigate the new risks, implement a well thought out marketing plan, train your staff to sell the product), and go for it.

Malzahn Strategic can help you choose which technology products to offer to your clients, which ones to implement later, and which ones to not invest in.

Building Your ERM Puzzle: Strategically Integrating it into Your Bank's Strategic Plan

It’s all about risk! We, bankers, know how to identify and assess risk, mitigate and eliminate risks when possible, and monitor and report on those risks. So why are we afraid of ERM? Enterprise Risk Management (ERM) is here to stay so we might as well learn what it’s all about. It’s not that complicated!

If you think about your bank’s Strategic Plan as a simple yet complete puzzle, some of the key components would be the Vision, Mission, S.W.O.T. analysis, Capital Plan, Talent Management, and the Enterprise Risk Management (ERM). Today we will focus on ERM.

Risk Management is at the heart of banking and every bank has to have processes, policies, and procedures in place in order to assess and manage the risks on their balance sheet. Think of ERM as a big puzzle within the bigger Strategic Plan puzzle. Just as with any puzzle, in order for you to put it all together, you’ll need a picture of the entire puzzle to know what it should look like when it’s all done. You will also need to know what the fundamental pieces of the puzzle look like and how the other pieces that connect to each piece relate to each other. In this article, we will use the analogy of puzzles to explain how important ERM is for your bank, no matter how small in asset size you are, how ERM is intricately related to every area of your bank, and how you can integrate your ERM program into your bank’s unique Strategic Plan. The ERM is a crucial piece of your Strategic Plan puzzle.

At the basic level, ERM has three phases (big puzzle pieces):

Identifying and assessing risk: During this phase you identify all the risks that can potentially affect your bank by using risk assessments. In this phase you should also identify unique risks that your bank has such as a relationship concentration or a specific industry concentration.

Mitigating and eliminating risk: During this phase you determine what your bank will do to mitigate some of the risks and how you can eliminate other risks. There are some risks that you will never be able to eliminate. For example, wire transfers are inherently of high risk and after you put controls in place such as policies and procedures, you will end up with a moderate to low residual risk. But the risk will never go away completely.

Monitoring and reporting risk: Once you have established your policies, processes, and procedures to mitigate and eliminate the risks you identified through the risk assessments on the first phase, then you need to monitor those risks and report the results to your Board of Directors. Monitoring is key because that’s how you establish accountability across the organization to ensure all your policies and procedures are being followed and that they actually work. The reporting is crucial because that is where management provides the results of the monitoring efforts to the Board and now the Board is liable for knowing and understanding what the bank is doing in regards to ERM. Some reporting tools are heat maps where you plot using colors where you feel each risk is at in regards to how the bank is mitigating that specific risk at that time.

The next step is to integrate your ERM program into your Strategic Plan by coming up with strategies to mitigate each one of the risks identified in the various categories of risk. Below are the most common risks: (each of these risks is a puzzle piece in itself connected to each other)

Capital, Liquidity, HR, IT, Profitability/Earnings, Legal, Operational/Transactional, Reputational, Compliance/Regulatory, Interest Rate Risk (IRR), Credit

Below are the key components of an Enterprise Risk Management Program: (big puzzle pieces)

  • Capital Plan (should be completely integrated into your Strategic Plan. What are your strategies to retain, protect, and grow your capital?)
  • Board Risk Appetite and Tolerance Statement (vitally important) –The Appetite Statement is your qualitative idea, what risks do you want to pursue? The Tolerance Statement is your quantitative statement, what are you willing to lose?
  • IT Security Program, which includes:
    • Disaster Recovery Plan
    • Business Continuity Plan
    • Cybersecurity Program
    • Vendor Management
  • Compliance Program
  • Internal Audit Program
  • Liquidity Contingency Funding Plan

Below are some simple steps to help you get started on your ERM program:

  • Form an ERM Committee (include your Board Directors and every area of your bank)
  • Write an ERM Committee Charter
  • Train your Board of Directors so they know their liability
  • Train your staff so they know their role in ERM and how every area is integrated with others
  • Define Board and management responsibilities in regards to ERM
  • Start by doing an ERM Risk Assessment to cover all areas of the bank
  • Know the bank regulations – know your industry
  • Establish policies to comply with regulations
  • Establish procedures and processes to comply with your policies
  • Establish an organizational and operational infrastructure to support current size and scalable for future growth
  • Establish Key Performance Indicators and Key Risk Indicators and reporting
  • Never stop the cycle! Once you have a program in place. Repeat!

Small asset size is not an excuse to not have an ERM program. The key is to know all your risks across the organization and to do something about them. The complexity of an ERM program depends on the size and uniqueness of a bank but, in the end, regulators will work with you and will be more understanding if they know you have done your best in putting in place a professional, well-thought out ERM program. Most banks have some pieces of the puzzle done but usually they don’t have them put together into one big puzzle or don’t know how to put it together. Others don’t have the picture of the entire puzzle. Seek out professionals that can help you put your ERM puzzle together!

Note: This article was also published in the Minnesota Bankers Association quarterly magazine. Malzahn Strategic is an Associate Member.

Traits of a Leader – Traits of a Follower

Many times people may think leaders have it easy, or that they do their own thing and are accountable to no one. Other times people may think leaders started being leaders and were also born leaders. But that is not the case. Being a leader is a serious responsibility and it’s not easy. Also, most leaders start as followers and have worked hard to be where they are today—even if they had the gift of leadership in them from the start. In fact, successful leaders are excellent followers themselves. Being a good follower is precisely what gives great leaders the foundation to be an example of integrity, honesty, and many of the other traits that we all admire in successful leaders. Below are some key traits of successful followers:

They need a teacher—a leader. Followers need to follow someone they trust and believe in—someone who is worthy of being followed.

Followers don’t doubt their leader. They have complete faith that their leader has his or her best interest at heart. They don’t fear that their leader is out to get them.

Good followers get to know their leader at the personal level. They understand their leader is also human and that they have a need for personal relationships too.

Good followers learn to appreciate their leaders for who they are. They are not “apple polishers.” They sincerely care for their leader.

Followers gather together to support their common leader. They don’t talk behind his or her back and they are loyal to their leader.

Good followers “do” what their leader tells them to do. They don’t second guess or question their leader each time he or she asks them to do something. In the business arena, of course, it is acceptable to ask questions to clarify direction and to bring your opinion but in the end, good followers learn to do what is asked of them unless it’s something illegal or unethical.

A good leader influences his or her followers and the followers allow themselves to be influenced. It’s a mutual relationship based on trust, something that is not common in the workplace these days.

Leaders give authority to their followers without fear that they will misuse that authority. Again, this exercise of giving authority to others is based on trust. Good followers accept that authority and use it wisely.

Followers admire and look up to their leader. They want to and aspire to be like their leader. They are proud of their leader and not ashamed. They want to imitate their leader and become more like him or her.

Successful followers receive instructions from their leader and work together to accomplish their common mission (or the vision of their company). They learn to use their various strengths as a team and get it done.

Now, let’s examine some of the traits we admire—and even expect—of successful leaders:

Leaders have the innate ability to influence others—at the core, that’s what leadership is about. Even though not everyone is born with the leadership gift or ability, every person who is in a leadership position can learn to be an amazing and influential leader.

Leaders continually strive to be balanced. Leaders understand the importance to live a balanced life. This doesn’t mean they don’t understand the responsibilities of their work life and don’t work enough. It means they also understand that if they are not taking care of themselves (their bodies, their physical well-being) and their family relationships, their level of influence at work will be diminished over time.

Leaders are learners. Most successful leaders are life-long learner individuals. They have a hunger for knowledge and enjoy the journey of learning. They also love to teach what they just learned.

Leaders have a good attitude toward life, which is manifested in their attitude and behavior at work and at home. We all know we cannot control circumstances but we can control our attitude. That I know because I have had to practice self-control and change my attitude many times when circumstances were negative around me. I know it can be done and you are the full beneficiary of the change in your attitude.

Leaders are hard workers. Regardless of the career they choose, leaders work hard. This doesn’t mean they work 90 – 100 hours a week, which some people do. That is almost irresponsible because they neglect their physical health, their relationships, and eventually it affects their effectiveness at work. They burn out. What this means is that they utilize their time wisely and have learned to manage their time successfully based on their values.

They focus their time on what’s most important—consistently. The key here is that they learned to say “no” to the things that clutter their lives with no significant impact or influence. And they say “yes” to the things that matter.

Most leaders are also followers. If you are a leader, choose to also be a good follower. Only then, will you become a true influential person. Only then, will you leave a legacy of goodwill in the lives of all the people you touch along the way. Therefore, choose carefully who you follow and choose to be the best leader you were meant to be.

As business professionals, we have the great opportunity to be an example of being a good follower and then influence others as leaders. Take the responsibility of doing both seriously.