Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey everyone, this
is Mark Treichel with another

episode of With Flying Colors.

Today, I'm excited to be
here with John McKechnie.

John, how are you doing today?

john M: Great, thank you, Mark.

Thanks for having me on.

How

Treichel: are your Orioles doing
heading into the All Star break?

They doing okay?

john M: First place I'm happy.

Last time I think I was on,
we talked about NFL football.

And I of course talked about my Ravens
and now I'm talking about the Orioles.

So that's right.

And

Treichel: my twins are doing okay.

They've got a few injuries.

Carlos Correa just got plantar fasciitis
for the second time in about 12 months,

but but other than that, we're trying
to track down the Cleveland Indians,

john M: It's the Cleveland Indians.

I agree with you.

I'm just trying to keep
you, between the lines.

Trying to

Treichel: keep me between the lines.

It's a good reference for baseball.

John you and I go way back, but some
of our listeners may have heard you

on a couple of our other episodes.

But for a listener who may not
be aware of your background, why

don't you give a little bit of your
your background in credit unions.

john M: Thank you.

I it's a long background as
we move on through the years.

I worked on Capitol Hill in
the late eighties, joined CUNA.

And on April fool's day, 1987,
which I think a lot of people will

know me will think is appropriate.

And then was with CUNA for 18 plus years.

And then I moved over to NCUA
where you and I were colleagues.

I worked for three chairman, Joanne
Johnson, Mike Freisel and Debbie Matz

and is actually during some of the most
interesting years we've had at NCUA

and since 2011 I've hung out my shingle
and been a consultant in the industry.

And Never a dull moment.

Treichel: For a dull moment, a lot
going on in the world and a lot going

on in credit unions as we sit here in
July now the topic of the day is crisis

communications and lessons learned
from good or bad crisis communications.

But you and I were chatting about
some things going on in the industry

and it made us reflect on some things
that we recall at our times at NCOA.

That's it.

I'm just going to loft that up there.

Crisis communications and lessons learned.

So what's your take on how an
institution should approach crisis

communication and then perhaps any
lessons learned relative to that?

john M: It's the obvious starting point, I
think, from where you and I intersect was,

of course, the financial crisis of 2008
2009 into 2010 just because, NCOA was so

front and center when things hit, and, of
course, any good crisis, I think, starts

on a Friday afternoon, and, of course In
this case, I remember my assistant came

into my office on a Friday afternoon
in late July of 2008 and said, Hey, you

better turn on TV, which is always a
bad thing to start a conversation with.

And I turned it on and there was a, an
SNL in Los Angeles that was having a run.

And you could, CNN had the helicopters
flying over this street scene of

people lined up around the block and,
right away, I knew that if people are

seeing that on TV, it's going to send
shockwaves through the financial world.

And sure enough, it did.

That was I think that may have been
the first domino to fall because

what happened over the next.

Month or so was that the, the liquidity
markets froze up, the mortgage market

froze up and even though that particular
incident was something in the SNL

world, credit unions certainly were
affected quickly to the point where

the liquidity strains in the industry.

necessitated NCOA scrambling quite a
bit to get the the central liquidity

facility upgraded and updated.

That, that required a pretty
heavy lift on Capitol Hill.

Fortunately, even though the industry
wasn't, the credit union trades weren't

happy about it, but they knew that
their members desperately needed this.

But the point of that is not
so much crisis communications.

It's just the fact that it
accelerated and put a lot of

pressure on everything that happened.

And of course, consumers that saw these,
this evidence of a run at a thrift,

they began to ask a lot of questions to
NCUA about how their credit union was.

And I remember we had a, we still, NCUA
still does have an 800 line and a little

a button on the webpage, how to get in
touch with NCUA about your insured funds.

And, in a month we would get maybe
50 inquiries on that telephone line.

In one week, we got 200 after that,
that the thrift problem started and

it just went downhill from there.

So I would say as a first and foremost
thing you as a credit union need to

always be very cognizant of the fact
that you have to inform your members

about the safety and soundness of
their funds and remind people that.

No one has ever lost a penny of
insured, federally insured money in

a federally insured credit union.

That's probably the first, I say
that's lessons number one, two,

three, four, and five, make sure
people know their money is safe.

If they've got it in a federally insured
account, make sure they know that.

I understand from a couple recent
examples in credit union land where

credit unions had problems with
cyber breaches and things like that.

I understand anecdotally that message did
not go out as quickly as it should have.

And let that be a lesson to everybody.

It needs to go out first.

Treichel: It's got to go out.

It's got to go out quick.

It's got to be accurate.

Got to be, and it's got to
be in quick meeting first.

Now that's the reality is
if you don't communicate.

The vacuum is gets created and the
water cooler talk starts or the

people in line, start conversation.

So you can, you want to be truthful, but
there's a truthful narrative that you

can tell by getting out in front of it.

john M: That's a great way to put it.

And I also add that when you're with
the federal government, like we were, I

think you really have to put an emphasis
on being the first with the truth.

Get out there, make sure you're
transparent, make sure you're above

board now in accrediting context.

That's also important because you need
to, you're, you are going to be the

authority that your members look to.

And you really need to
be very transparent.

And always keep in mind that you're trying
to, you're there to help them and you're

there, part of member service is making
sure they understand what's going on.

And, again be authoritative
be truthful, be transparent.

These are the kinds of things that
they sound elementary, but when there's

a crisis going on, maybe it's not
always apparent what you should do.

And also, this sounds obvious,
but keep your head, just realize

that you've got a job to do.

You know what you're doing.

You're the experts get it done.

Treichel: And I'm, as you're
walking through that, I'm thinking

about, again, Credit unions, but
I'm thinking about our time at N.

C.

U.

A.

And we had at N.

C.

U.

A.

And they still do.

They have a very robust list of
delegations of authority, right?

This person can do this.

Regional directors can do this.

The executive director can do this.

The board retains this.

Et cetera, et cetera.

And part of that is if the executive
director is not available or if

regional directors of the board's
not available having set things in

motion so that you can move quickly.

In the case of a crisis,
let's say a plane went down.

Let's say just people, the internet
on the East coast went down and

we would tabletop these things.

And I was talking to a credit union about
cybersecurity and they're having their

planning session and the tabletop exercise
they're having at their retreat this month

relates to cybersecurity and then some
things hit the news where some credit

unions were feeling challenges with that.

But having the delegations of authority,
having a plan the same can be said for

credit unions being prepared and having a
crisis communication plan, having a team

where you've tabletop, tabletop exercise
some of those things and or having outside

resources available potentially at the
drop of a hat should something go bad.

That you can use as part
of your, as your plan.

Any thoughts on what I just said there?

john M: Oh you're a hundred
percent correct about it.

I, Omar Bradley during the
second world war used to say

that when the fighting starts.

Plans are useless, but
planning is essential.

And I think that strikes the
core of what you just said.

You've got to have gone through the
planning process to think about the kind

of things you're going to deal with.

Admittedly, once stuff starts,
it gets a little bit difficult to

try to adhere to a piece of paper.

But having thought about and
going through these pro the

process, you have to do that.

And I commend any credit union that, that.

goes through these kind of exercises
just to get your minds thinking

about how to respond and react.

And I would also jump back again.

You mentioned something about
a crisis communication plan.

I again Have heard quite a bit in the
last year from various credit unions

that have had cyber breaches, have
had ransomware, et cetera, et cetera.

And in a couple instances, credit
unions did very well and got through

it with flying colors for your
shows, a plug for your show there.

But the other the other part of it,
though, is that some credit unions

did not in fact, have any kind of
communication plan on the shelf.

And they wish they did once they
find out how important it was when

things started to hit the fan.

But yeah, I think anybody listening
to this podcast ought to understand

that get something on paper, get some
kind of communication plan on paper.

You talked about the tabletop activities.

That's important.

Delegations of authority.

Of course, the government is.

A bit different than the private
sector, but the process is really

important to think about the kind
of things you need to focus on.

And I'll say one more
thing and then be quiet.

And that is that one of the most important
things about any communication, whether

it's crisis communication or not,
you have to figure out what audiences

you want to touch and do that early.

So in the case of a credit union,
who's experiencing some kind of

breach, your first and foremost
audience has got to be your membership.

Everything else takes a backseat to that.

Treichel: It's a great point.

You've got, you've got the who are
the key stakeholders, the employees,

the members the media, the regulator
that, that checklist, that planning,

that tabletop exercise would be okay.

Who are the stakeholders?

What's the order of importance?

You know what?

And when I think about when I think about.

Checklist, I think about the NCA version
of a disaster is a conservatorship action

that needs to be taken on a Friday, right?

And there's a, I don't know how
many pages long it is now, four,

five, six, seven page checklist, the
conservatorship checklist, you go in,

you count cash, you remove the officials.

You call the corporate, tell
them that there's a change of

signature, you change the locks.

Every time NCOA does a conservatorship,
they come across something that they

hadn't thought of, like you said,
doesn't, the plan is there and then the

chaos hits, but you have that kind of
as your beacon that you can go back to

and at the end of the conservatorship,
you go, you know what, we came up

with a new thing for the checklist.

But by having that plan in place, you
have a more methodical approach by

having a committee that's looking at it
by having a group of people that have

what their responsibilities are, right?

You talk about the stakeholders.

Who's going to communicate
to the employees?

Who's going to communicate to the members?

It should be someone high up, right?

Perhaps all the way to the top, whether
it's the board chairman or the CEO,

who's going to communicate with the
media and then making sure that you're

all singing from the same hymnal.

john M: There's a saying about
experience is the best teacher.

Unfortunately, bad experience
is the best teacher.

And, I, Since I've been doing my own
thing as a consultant, I encountered one

credit union that essentially after I was
brought in, they told me this is maybe 72

hours after they knew about the breach.

They mentioned to me that
they've been ducking the calls

of their state regulator.

For 24 plus hours.

And I don't know what my facial expression
was, but I don't think it was good.

The point is don't do something like that.

Don't you can't try to evade or over
avoid, the legal authorities that

you have to deal with in the case of
this particular credit union, it was

a state charter, federally insured.

Don't do something like that.

I think everybody at that credit,
you knew it was a mistake and

yet they didn't know what to do.

We're making it sound drastic and it
can be, but if you know what you're

doing and you have thought this through,
it doesn't have to make things worse.

As a matter of fact, you can make
things a lot better for everybody.

Treichel: And you, as you were talking,
I was thinking about when nine 11

happened in New York city and the, the,
all the communications in the, in New

York city were down, banking systems
were down, ATM networks were down.

I can remember a couple
of large credit unions.

I was the regional director
at that point in time.

And they had a plan in place and they,
they put it in place and they essentially

were letting people get money even though
they couldn't reconcile, people could

get a certain amount of money out every
day and you know what, that costs them

money, but they went into it knowing
if something like this happened, that

they were going to strategize that way.

Of course it far exceeded everything
that they thought they were going to do.

But because they had done some planning
they were able to pivot real quickly

and go, okay there's going to be
losses here, but these people are

going to need money as well Our members
we need to take care of our members

going back to who comes first, right?

It's the members credit union and you
know when you do have a cyber attack

when you do have Ransomware that
prevents it, it's going to provide good

service and then there are going to be
people who take advantage of that and

ultimately you're going to end up having
some losses, but you got to think about

the longterm and how you're treating
those people in their time of need.

john M: Yeah.

Yeah.

And I, that's well said, and I think.

In addition to that, look at this
kind of problem, if you will, as a

opportunity to remind your members that
you're on their side, that you're here

to help and what you just described
is a, it's a good example of crediting

and stepping up when everything was,
going to heck here they are they're

here with some money that I needed.

People remember that.

Treichel: They do.

They do.

Any thoughts on, it's you've got people
get their communication through Twitter.

People get their communication
through Facebook.

People get their communication
from coming to the branch.

Obviously what, where you're at on
the journey of life kind of determines

which one of those ways you're going
to, you're going to communicate.

Some people want email.

Any thoughts on having a broad
plan that, that incorporates.

Multiple ways of reaching
your members in a crisis.

john M: That's a personal thing
for me because I am not a tech guy.

I'm not I use the internet
extensively in my work.

I'm addicted to my iPhone and all that,
but I'm not really a social media user

per se, but I can remember when you and I
were colleagues, And I was the head of the

public and congressional affairs office.

I knew that I had to go fishing where
the fish were biting, meaning you had to

go out into the social media channels.

So I got help.

I got some people, somebody within the
agency and then later outside the agency

to help me design a communication plan
that maximized, our messages to people.

And by the way, this is not strategic
as much as it's tactical, but.

I always recommend that if a credit
union has a problem like this, they

set up what is called a landing page.

That's something on the website, like
you can click a button on the website, on

the credit union's website, that directs
the member to a specific dedicated page.

It's full of all the information,
one stop shop, with everything you

need to know about this particular
breach or whatever it's going, or the

ransomware, cyber attack, whatever it is.

That landing page will be a one stop shop.

That's something that Always recommend.

It's always a good idea.

We did that at the agency.

We had a specials.

It's essentially you're
creating a parallel web page.

So when somebody came to ensure
his page back during this mortgage

crisis, if they wanted to, they
could be directed to this other page

that gave them what they needed.

Really important.

I know it sounds basic.

Treichel: No, that makes sense.

I, by the way, my website is marktreichel.

com.

I actually bought Mark Treichel
spelled wrong with the E and the I

flopped because so many people spell
it the wrong way when they type it

out to me that it'll automatically
roll over to the right pronunciation.

Just a non sequitur there, but having
another, having an alternate website.

Ready to rock and roll where you
can make those messages concise

and focus makes a lot of sense.

john M: Probably having a name like
McKechnie and see how that goes.

Treichel: M little C, big K, right?

You have these plans things go wrong.

You learn from the plans.

Hopefully you're able to serve
your members and get through

it to fight another day.

And then you do a postmortem.

When NCA loses money,
I think it's over 10.

If a credit union failure costs NCA
more than $10 million, the inspector

general has to do a postmortem.

If it costs more than two or five
million, I think the office of examination

and insurance does a postmortem.

And if it's less than that, the
region will do a postmortem again,

like the conservatorship checklist.

What did we learn here?

So any thoughts relative to,
to crisis communication, the

aftermath after the dust settles?

john M: Yeah, never stopped learning from
the mistakes, especially taking a half

step back, what you were saying about,
What to expect, it's the, what I call

the roadhouse theory of public affairs.

There was a movie
roadhouse, Patrick Swayze.

Treichel: People throw beers in that.

john M: Yeah, they do.

And we threw a lot of beer at
NCOA back in those days too.

But Patrick Swayze had this great speech.

He gave, he was a bouncer in a
bar and he gave a speech to his,

his his fellow bouncers saying,
always expect the unexpected.

And I think.

As part of these communication
plans, as much as we talk about

them in, in this nice, comfortable
podcast we're doing, when things

are really happening, it's not.

It's not always easy to keep your head.

Expect the unexpected and just expect
that as part as a, as just a, an ordinary

part of a crisis, you got a lot of
people involved, a lot of emotions.

Technology of course has its own problems.

Again, I'm familiar in the last few
months with several credit unions

that have been either victims of
cyber attacks or ransomware attacks.

And, There's no way they would talk
to somebody like you or I to help them

with the technology part, but at least
we can help get them through the member

relations and the communications needs.

That's what's, that's what you and I are
talking about in terms of the tech stuff.

Boy, I, dealing with Capitol
Hill and the administration.

You can tell that it's a
priority of everybody to realize

just how serious this is.

As much as the good actors keep trying
to keep up with things, the bad actors

seem to be always a half step ahead.

Treichel: Yeah.

They the situations keep coming.

You talked about, the emotional
side the, you're going to have

members that, that are crying.

You're going to have
members that are screaming.

You're going to have, you're going
to have people that need more money,

in a ransomware situation than
you might be able to give them.

It's just the importance of having
that empathy and being able to listen.

I remember when the corporate crisis
happened and we had conserved U.

S.

Central and West Corps and Scott Hunt
of the agency, who's still at the agency

now, he's the Director of WANS, Scott
Hunt and I were out at West Corps and the

agency had taken over the West Corps and
there were capital holders there and the

capital was depleted and we needed to have
a communication plan to call them and say,

Hey, We've taken the credit union over.

We need you to keep your deposits in here.

Cause if you pull them, we're going to
have to sell the underlying deposits.

By the way, you also have to write,
you have to write your capital off,

but you need to keep your money in or
your losses are going to be permanent.

If you work with us.

We can hold these more to maturity.

They're going to regain their
value, hopefully, and you might

get some of your capital back.

Lo and behold, they got most of
their capital, if not all of their

capital back, it took a while.

But that day I remember when Scott and I
split up the list and it was like, heavy

sides boy, this is going to be a fun day.

And I had, we had people yelling at us.

We had people talking about how they
couldn't handle it, but we, they

needed to know, and we needed to get
them through a few stages of grief

so that they could understand it.

But there were also people on that
call that cheered me up saying, gosh,

I'm glad I don't have your job today.

Cause I know it's a tough one.

So there's empathy goes both ways.

john M: Yes, it does.

And giving the, giving out
the vibe that, that look.

It's a tough situation, but
we've got it under control.

We know what we're doing that
sending out that kind of reassurance.

I, you just touched upon something.

I remember quite vividly.

It was a painful moment during the
crisis because one of the league

presidents who I've known and loved
and respected for a long time.

But during the crisis, he was like,
let these corporates all fail.

Don't touch my, my, my members,
my, my natural person credits,

let these institutions fail.

It's not the problem.

Of the the natural person
creating and our response.

I remember myself and our general
counsel at the time, the late

grade Bob Fenner, and one, maybe
you were involved in this too.

We were like, if you let these
institutions fail and blow that kind

of a hole in the share insurance fund,
it is going to affect, it's going to

trickle down and affect all credit unions.

You don't want that.

You want to try to stay big picture.

You want to try to stay focused.

We'll get through this, but don't panic.

And if you're accrediting and talking
to your members during a breach or a

ransomware attack, you have to convey
that same sense that, look, we're going

to, we're federally insured, the money's
safe let's make sure we get through this.

Treichel: That covers 99 percent of the
people who they know their life savings.

If they're at that, if they keep
everything at that one credit

union, they know that it's going
to be safe when the dust settles.

Things get back to normal and that
communication from the top, setting

the tone from the top providing
the comfort when people are asking

those questions is so important.

Great.

John any last things I, anything
I should have asked you related to

crisis communication today, as we as
we chat here on a, what is it a Monday?

john M: We're talking mostly about.

Events that are most, that
are tech driven, the cyber

breach, the ransomware breach.

I guess we could discuss a little
bit about the the pandemic was

a whole different breed of cat.

But again, the basics are still the
same in both types of situations.

Tell people the truth, be quick about it.

I quoted Omar Bradley and Patrick Swayze.

I'm going to also quote John
Wooden, the basketball coach.

I

Treichel: love this quote.

You go, I love it.

Go for it.

john M: He said, be
quick, but don't hurry.

Is that the one you're thinking of?

That's the one.

Just want to, you want to get
stuff, you want to be quick.

You don't want to, you don't want to
rush anything, but make sure you get out

there and tell people what they need to
know and again, make sure you know who

you need to communicate and what with, in
what order it's all important dealing with

the actual outside media is essential.

I got a an anecdote related to me
just a week ago about A credit union

that just refused to talk about the
major to talk, they refused to talk to

the major newspaper in their market.

And your point earlier about
how, if you create a vacuum,

somebody else is going to fill it.

And it's probably not
going to be to your liking.

So make sure you communicate what
you want to know, what you want to

tell them to the right audiences.

Treichel: Great point.

Great point.

You reminded me one last war story
from when we were out at Westcourt.

So we were worried about the press
and there was a little bit of

press that was happening and then.

We, we're looking out the window and
we thought that the place was closed.

And I think we thought we
saw a news van drive by.

But then we had the TV's on, TV
on, and we were, sometimes it's,

you want to be good and lucky.

If you can get some luck and
you can be good at what you

do, you can survive usually.

But the octo mom had her eight kids.

Out on the West Coast.

So we went from thinking we were
going to be the top story to there

not being any airtime for what
might've been happening at the biggest

conservatorship in the history of NCUA.

So a little bit of luck and
our preparation and the credit

unions cooperations, everybody
kept their deposits in.

Everybody was going to get
able to get their capital back.

I'll never forget.

john M: I

Treichel: Didn't

john M: know that but we'll have
to keep an optimum and in reserve

in case we need that again.

Treichel: That's right.

Yeah, you just gotta,
again, gotta be lucky.

John, this has been fun
catching up with you as always.

If one of my listeners wants to reach
out to chat with you about what we've

talked about here or anything else what's
the best way for them to reach you?

john M: Try me at my website is,
or my email is john at McKechnie

LLC, and I'll spell that it's M
C K E C H N I E L L C dot com.

John at McKechnie LLC dot com.

Phone number is 202 997 5816.

Would love to hear from folks if you
have any questions or suggestions.

Thank you.

Treichel: Very good, John.

And I'll put the, in the show notes,
I'll put that contact information.

I want to appreciate you being
able to be available to chat on

such short notice here today.

john M: Way to do it.

This is an important topic,
especially given the times

Treichel: you got it.

You got it.

And listeners, I want to thank
you for listening as always.

I hope you'll listen to it again soon.

This is Mark Treichel signing
off with flying colors.