DEI & Compliance

DEI: More Than a Buzzword

June 13, 2023

Originally published in CU Management as "The Growing Connection Between Compliance and DEI", June 2, 2023. 

By Miriam De Dios Woodward, Global CEO

Diversity, equity and inclusion initiatives are a hot topic in all industries, and we’ve been talking about this a lot lately in the credit union space too. The communities around us are becoming more and more diverse. Having a robust DEI program that is a part of the credit union’s strategic plan sets up an organization for future success in the form of membership growth, product and service innovation, and better risk management practices.  

Before becoming global CEO of ViClarity, I led Coopera, consulting with credit unions on how to build strategies to meet the needs of underrepresented markets and raise their multicultural membership. Cultivating a team that understands the needs of their credit union’s members helps to spur development of products and services and builds a more inclusive financial landscape, which not only benefits underserved communities but credit unions themselves. 

Now, as a leader at ViClarity—a global governance, risk, and compliance software and services firm—I’ve been working with my colleagues to focus on understanding the relationship between compliance and DEI practices to better serve our clients. With our credit union partners, we are seeing their financial inclusion work and compliance obligations intersect and overlap. Our own principles help us to understand that a diverse, well-rounded team positions us to successfully serve the unique needs of each client (and by extension, their members). 

DEI Starts with Leadership 

While every person in an organization has a duty and responsibility for the success of a DEI program, it all begins with leadership. An executive team and board that reflects their employees, members and community positively impacts the culture of their organization and the quality of business operations. Corporate governance is a critical component of DEI and a leadership team that fails to understand their role in it is likely to find their initiatives falling flat. 

Not only does diversity of leadership fuel DEI strategies, but it also positively impacts the business in other ways. It builds safety and soundness by giving voice to a variety of perspectives that stops “groupthink” in its tracks. While it may provide a comfort zone for some leaders, group thinking can be extremely detrimental to the momentum of a business and its ability to manage risks.

An example of the important role governance plays in the credit union is the succession planning rule approved by the National Credit Union Administration last year. As credit unions are now obligated to formalize succession planning, I urge you to take this opportunity to look at it through a DEI lens—this provides a clear way to bring in new voices and backgrounds to support the future growth of your organization. 

The Impact of Regulators

NCUA is becoming more vocal about DEI planning, strategies and policies in credit unions. The Credit Union Diversity Self-Assessment is voluntary, but NCUA is pointing to diversity and inclusion as an opportunity to gain competitive advantage. It unleashes employee potential, attracts talent and helps identify the needs of underserved markets. Although it currently remains outside of NCUA examinations and does not impact CAMELS ratings, NCUA’s interest in DEI highlights its importance within a credit union. It’s clearly a hot topic as we see DEI summits, conferences and presentations popping up throughout the industry. 

While DEI information from regulators is primarily in the form of guidance rather than strict requirements, there are also strong connections to compliance and external activity, such as the current concern around appraisal bias, redlining enforcement actions and an increased emphasis on fair lending exams. As we see more feedback from practicing DEI professionals on challenges and roadblocks, involving your compliance and risk team becomes more critical. 

As a global organization, ViClarity also learns from credit union regulators in other countries, such as the Central Bank of Ireland. As the world becomes more interconnected it’s important to pay attention to global learnings. Check out ViClarity’s informational European blog on viewing DEI through a regulatory and risk lens for a perspective on how other countries are starting to view DEI.

Connecting External & Internal Strategies 

An external DEI strategy impacts what products and services you offer the marketplace and how you market them to members. When building those communication strategies, credit unions first need to address whether they are providing the right products and services to match the needs of their members. This gives a better assessment of the true risk facing the organization. 

The success of external strategies relies on the strength of internal DEI practices. Focusing just on applying your principles can keep your DEI program from providing any ROI. Board and leadership involvement in connecting external and internal strategies helps build stronger, more beneficial programs for your members and your business. By attracting employees with diverse backgrounds, credit unions can create a cycle of innovation that continuously evolves and improves due to the diversity of thought and problem-solving within the team. 

Measuring Progress Is Key 

Regardless of the program benefits, many organizations struggle to measure both internal and external DEI efforts. It can cause headaches to collect and organize the data, let alone analyze it for progress towards goals. More importantly, it can be difficult to display the connection between internal practices and external results and practices — which can prevent you from identifying successes, weaknesses and action steps. 

Don’t be afraid to turn to technology to help track and measure progress. When it comes to DEI, we all have something to learn, and technology can provide visibility into current practices and future needs. 

As DEI efforts become increasingly important to the success of credit unions and companies like ViClarity that partner with them, I challenge leaders to consider their role in driving and measuring progress, as well as the risks of falling short.

 

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