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Realigning Risk Management: What If You’re Wrong?

I really wanted to do one of my “pipe rants” (as Chris likes to call them) and I might, but I wanted to put this idea out there first.  Plus…it’s too hot in Memphis right now!

Earlier this week, we had Pete Nelson with AgLaunch on our Barret Ag Lending Roundtable for Q2.  Pete is a thought leader in the ag tech arena and one of the most practical thinkers about this topic and how ag tech interacts with banking.  In my opinion, ag tech gets overlooked by banks because we don’t see the connection between improvements in a niche market like that and how it impacts our farmers thereby improving their loan quality.  Let’s face it, ag is highly levered, razor thin margins, and commodity prices are so heavily impacted by geopolitical chaos.  However, they are vital to our economy and are vital to many of the communities they serve.

Pete, however, made an interesting statement in the Roundtable discussion that I think warrants more thought about implementation in the banks and that’s how community banks can monitor risks like geopolitical, artificial intelligence, ag tech, fintech, climate change etc.  I hear it all the time…”AI isn’t going to impact our community” … “we’ve got plenty of time before this impacts us” …” we don’t need those fancy toys”.  I can cite all kinds of data that disproves that, but let’s make it easy here…

What if you’re wrong?


I’m not trying to be argumentative.  As risk managers, we need to evaluate risk.  That’s what we do for a living.  When we underwrite an apartment or some other CRE credit, don’t we stress vacancy to see how that would impact cash flow?  I’m asking you to “stress” your thoughts to look at the “what if” side of risks that are outside of the normal risk assessments we do in banking.

I want to give Pete full credit for this idea because I’m all doing is expanding upon it.

I get that most community banks don’t have the bandwidth, desire, or money to go and hire an AI risk assessment team or hire climate change scientists to study the impact on their farmers, or keep an eye on fintech at all times given that ever changing world.   But I am willing to bet that someone in the bank might have a desire to learn more about a topic that might impact the bank.

So, here’s the idea and you can use any group of topics you want.  I’m going to use the first four that came to mind (fintech, AI, ag tech, climate).  To start, ask your employees who has 20 minutes a week to read up on 4 topics and write a short memo to management on these topics every month or, at least, every quarter.  You might even want to put together a group of employees to do this. Then, once a month or once a quarter, they would have a cup of coffee with the management team where this research team would discuss some trends they have seen with management.  It would look something like this:

Week 1 Fintech
Week 2 Ag tech
Week 3 AI
Week 4 Climate
repeat this for each month in the quarter and have them write a brief memo discussing what they learned.
At the end of the quarter, have a coffee chat with management discussing their memos, trends they see and how they impact the bank.

Where’s the down side?  You’re out the time it takes for a cup of coffee and maybe 30 minutes.  You ask an employee (or group of employees) to become your internal subject matter experts on 4 things that may/may not impact banking to commit 20 minutes a week to help the bank and, let’s be honest, to spend some face time with bank management.

Where’s the up side?  You’ve “outsourced” some aspects of managing external risk to the bank to employees that actively want to help the bank, want to learn, and, again, want some face time with management.  You are staying on top of external threats that may/may not impact the bank with almost no cost.  When you look at it like that, the ROI is enormous given that you would be the first to react in your market (or very close to the first) and can appropriately respond.  Let your competition be the last to table…not you!  It’s a chance to see who on your team (at any position on the organizational chart) is willing to step up and do a miniscule amount of extra effort in order to grow and learn.  If you can’t find anyone in your bank (which I doubt) that’s pretty telling about the culture and should point you to some blind spots you may not have noticed before now.

Be willing to broaden that request too.  Younger (and therefore may not be at management level) employees would have some more time on their hands, be much more willing to engage with a learning opportunity like this, and, frankly, might understand these topics a little better.

In short…there’s no real down side to this.  You’ve positioned your bank to proactively evaluate risk that may/may not impact your bank at little to no cost.

How is any of this a bad thing for the bank?


written by


Byron Earnheart is the Programming Director for the Barret School of Banking in Memphis, TN and the host of the “Main Street Banking” podcast…the only podcast solely devoted to community banks. He has over 15 years experience in the financial services industry; 11 of which have been in banking in various roles from teller work to branch management. He spends his time playing guitar and singing in Delta Heart (the “house band of the Mississippi Delta”), writing music, cooking, reading, and enduring the University of Tennessee Volunteers athletic seasons. He is married to his wife Kelly of 11 years and has two children, John Aubrey (11) and Mary Laura (7). If you'd like to hear Byron's music, check him out on Spotify:
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