48 JANUARY / FEBRUARY 2018 Steve Brown President and CEO PCBB In an ever-changing economic landscape, chief financial officers and risk management officers are facing both new and familiar challenges as they plan for the future. A recent survey by PCBB of these executives sheds some light on the top challenges and concerns, the changing roles of CFOs, and what these executives are focusing on in 2018. Keeping Them Up at Night Surveys of almost 200 CFOs and risk management officers at community banks across the country, ranging from $100 million in assets and up, shared their top challenges in the industry. Following are some highlights of their concerns and what is keeping them up at night, based on two surveys by PCBB: the 2017 State of the Union for Community Bank CFOs survey, and the 2017 State of the Union for Community Bank Risk Management Officers survey. 1. Leveraging technology. Nearly twothirds of community bank CFOs rank new technology at the top of their list of concerns. The U.S. government has determined that money laundering and cybersecurity are national security threats to the country, so bank regulatory scrutiny in these areas has ramped up significantly. CFOs also reported that learning how to leverage technology to serve customers, support new products and services, and aid in operations is taking up an increasing portion of their day. 2. The changing role of the CFO. Nearly half of CFOs say their roles have grown significantly in the past five years, which may explain why one in five indicate they do not have adequate staffing and budget for their primary financial responsibilities, or to engage in strategic initiatives. About 39 percent indicated they spend less than half their time on financial matters. Very few CFOs say their roles have stayed the same. What has shifted the role of the community bank CFO? Technology-related projects are taking up more of the CFO’s time, and this requires getting up-to-speed on areas outside their scope of expertise. This means education, training costs and hiring more staff – big budgeting issues. CFOs need more time to devote to their roles as part of the management team, but the role has shifted, and that affects their priorities. Only about one-third of CFOs spend more than 75 percent of their time on financial matters. They may need to offload some responsibilities in order to get more time to spend in other areas, such as loan pricing, loan portfolio risk or loan loss reserves, where their knowledge is increasingly needed to enhance results and manage risks. 3. Regulatory compliance. Just over half of CFOs at community banks say their organization is “somewhat prepared” for the new current expected credit loss (CECL) standard; and no one claims to be “very prepared.” While adoption is not effective until 2021 for many entities, the time for institutions to prepare for implementation is now. Extraordinary in its complexity, the standard has raised uncertainty regarding its applicability, particularly for financial institutions. The survey shows responsibility for preparing a bank for CECL compliance falls primarily to the CFO. But like the Bank Secrecy Act and the implementation of its anti-money laundering rules, implementing CECL requires a dedicated team effort involving finance, compliance, lending and risk officers – which means ensuring that enough resources are available. 4. Succession planning. Nearly two-thirds of community bank CFOs feel their responsibilities are manageable, yet one-third report What Keeps You Up at Night? Insights from community bank officers Article authors Jeff Baker Partner RSM US LLP PCBB and RSM US LLP are associate members of the Indiana Bankers Association. Questions for PCBB may be emailed to mktg@pcbb.com, and for RSM US LLP to michele.morgantalley@ rsmus.com. DIRECTORS / SENIOR MANAGEMENT
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