Pub. 1 2021 Issue 3

June 2021 | 25 How will CECL impact my institution? Adoption of the new standard will influence internal controls and information likely not previously integrated into financial reporting efforts. In other words, the scope of CECL is far-reaching — spanning corporate governance, modeling, credit analysis, technology, and others. Additionally, CECL affects all entities holding loans, debt securities, trade receivables, and off-balance-sheet credit exposures. In short: it will have significant implications for operations at most financial institutions. How to proceed toward CECL transition The time to get started — if you haven’t already — is now. This is a significant change with extensive effects and potential risks. Careful — and early — planning is key. Here are nine key steps institutions can take to achieve CECL compliance: 1. Identify functional areas (such as lending, credit review, audit, management, and board) that need to participate in the transition project/ implementation and ensure these areas are familiar with the new standard 2. Determine your effective date and whether to early adopt 3. Make a project plan and timeline 4. Discuss the plan and progress with all stakeholders as well as your regulator 5. Determine the ACL estimation method/methods to be used 6. Identify available data and any other data that may be needed 7. Identify potential system changes 8. Evaluate and plan for the potential impact on regulatory capital 9. Have a clear, well-understood process Finally, it’s necessary to take a holistic view to ensure a smooth transition, including: • Build in testing for data integrity and method estimation validation • Update other bank policies and reports so they are consistent with processes • Consider running parallel with the ALLL to evaluate risks • Back-test as part of supporting modifications and improvements What are the implementation timelines? This standard was effective for many institutions by December 2019, and all others will need to comply by March 2023. These dates are based on the Public Business Entity (PBE) status for institutions. Early adoption was allowed for any institution after December 2018. How can RMSG help? Risk Management Solutions Group (RMSG) offers a comprehensive suite of regulatory and compliance services for community and midsize banks. Customized to your unique business needs, our consulting services are delivered by experienced subject matter professionals — all at an accessible price. • When it comes toCECL, it’s important to start planning now to ensure you meet deadlines andminimize risk. We can help youwith: • Understanding the requirement and howyour community ormidsize bank can achieve compliance • Consideration around various CECL methodologies andwhichmay best apply to your organization • Reviewing your processes tomake sure they are sustainable, manageable, and consistently applied—nowand into the future ■ Contact us for a complimentary and confidential risk management consultation. 866.825.6793, riskmsg.com. RMSG is a wholly owned subsidiary of Bankers Healthcare Group. To learn more about RMSG visit riskmsg.com.