CUSO 3.0 The Network Guy Messick Messick & Weber, PC - PowerPoint PPT Presentation

CUSO 3.0 The Network Guy Messick Messick & Weber, PC www.CUSOLaw.com

Guy’s Job • Putting the Network concept in perspective relative to other types of collaborations • Explaining the Principles of the Network Model • Setting the stage for Randy to talk about the possibilities in the design, integration and use of the Network Model.

The Evolution of Collaboration Among Credit Unions

CUSO Evolutionary Trends • Prior to 1993: Credit unions informally provided help to each other and Leagues provided assistance on compliance issues • 1993 – 2001: Credit unions formed solely owned CUSOs to provide financial services (CUSO 1.0) • 2001 – Today: Multi-owned CUSOs provide specific operational services (CUSO 2.0) • Next Phase: Multi-owned CUSOs providing fully integrated operational services in a networked organizational structure (CUSO 3.0)

The CUSO Hub

The Integrated Network

CUSO 3.0 Principles of a Network

Network as a Dual Open Network Design • Outside – In Pattern – CU using resources from outside the CU to help run the CU • Inside – Out Pattern – CU taking resources it has and offering it for use outside the CU

A Network is not… • A Desjardin central controlled, multiple outlet model • A model that requires all credit union interactions go through a CUSO Hub • A model that only permits collaboration within the Network

A Network requires that the credit union owners have a mindset that… • Seeks collaborative solutions first • Believes that the ability of them to survive and serve their members is directly linked to the success of the Network

A Network requires that the credit union owners have a mindset that… • Will not accept anything less then the most effective services available and be willing to use the best providers wherever they are located • Believes that new CU member for the Network benefits all CU’s, so don’t fight over the new members

Network Opportunity • Operating credit unions - $28 billion market • The Network facilitates the sharing of excess capacity among the credit unions – Employee Sharing – Projects bid by credit unions

Network Opportunity • Web Portal – Browse provider postings – Post requests for proposals – Peer reviews of providers – No liability for employee lending – Standard agreements with scope of work orders

Network Opportunity • Capacity shortfall solutions not contained among the credit unions are identified and the outside providers are managed by the Network • Network takes the initiative and creates growth opportunities

Network Connections • Be able to see and work with each other through IT connections • May have required services and optional services • The Network will connect with other networks and providers to widen opportunities for the credit unions

Network Principles - Owners • Only credit unions • The owners of the Network must be users and supporters of the Network – Ability to remove participants from the Network that are not using or supporting the Network • Non-owner users can be served but that can create more of a vendor relationship

Network Principles - Fees and Capital • Fees and pricing encourages usage – Not a profit motive but some reserve for R & D and capital to timely take advantage of opportunities – A sufficient capital base with transactional pricing model – Tiered pricing or rebates to reward the high volume users

Network Principles - Fees and Capital • Return on capital – None expected or if expected the return is only at overnight fund level • Non-contributed equity stays in the Network – Departing participants take net capital out over time or when new investor comes in

Network Principles Delivery of Services • Services quick to market – Network Protocol Agreement with service riders – Common due diligence and contract review – Ability to rely upon the judgment of the Network for operational functions

Network Principles -Information • No proprietary rights to intellectual capital – Best of breed for forms, polices and agreements available to all participants • Member information is protected – Shared with Network and CU providers as needed for services but shielded from other participants (non-identifying aggregate info is shared)

Network Principles - Governance • Network Board – CEO level or senior staff with broad decision making authority – CU directors not on Network board as Network is an operational function • All participants have a means of feedback to the Network • Network staff is entrepreneurial with performance based compensation

Network Principles Interaction within the Network • The Network sets the policies and protocols on how the participants interact with the Network • Business relationships and transactions within the Network are transparent to the credit unions

Network Principles Interaction of CU with Members • The credit unions control the interactions with their members • The Network is invisible to the CU members

Network Principles Dispute Resolution & Insurance • Mediate and arbitrate internally • No indemnification by the Network – The Network has an obligation to perform but as the Network is an extension of the participants there is no indemnification by the Network to participants • Insurance and bonding should be obtained for Network’s activity

Network Principles Performance Standards and Accountability • Performance standards are set and measured • Accountability and consequences for failure to meet the performance standards • A Network is much more transparent and accountable to its owners than credit unions.

Accountability of the Network • Network operations are transparent to credit union owners. • Owners have a personal stake in the performance of the Network, especially CEOs of credit union owners. • Owners establish the performance standards and measure against them. • A Network is run as a business can make the tough decisions to increase efficiencies without the cultural impediments of a credit union .

Ultimate Question for Accountability Are there sufficient checks and balances that the service levels to be provided by the Network will be equal to or greater than the service levels that the credit union now provides to itself?

Preparing the Credit Union to work within a Networks

Prep Work • Educate your board and staff on the need and benefits of the Network • Assign specific responsibility to employees to integrate with the Network • Coach them through the transition

Prep Work • Align their personal incentives to the success of the Network Model • Reward initiative, innovation and results • Make sure the right people are on the bus

That is the concept…now let’s see what this puppy can do… Randy it is all yours.