Monitoring the Volatile World of Car Dealerships and Vendors
Keesler Federal Credit Union (KFCU), faced an increasingly unwieldy problem: in their auto finance area, they needed to be able to keep a close eye on the financial health and stability of car dealerships during a time of economic turmoil. The only process in place was relying on calls to the Better Business Bureau — a time-consuming practice when it involves dozens of dealerships, and hardly a solid resource when it came to financial health.
To make the situation more complicated, many car dealerships that work with KFCU are privately owned, making it even more difficult to find financial details about them. “The dealers don’t give out that kind of financial information when they’re privately held,” said KFCU executives. Given that the National Credit Union Administration (NCUA), the regulatory government agency that oversees credit unions, requires considerable due diligence on all vendor transactions, this was not only an inconvenience, but an obstacle in being able to properly conduct business as a credit union.
KFCU realized that to be compliant with credit union regulations, it needed to find a monitoring solution beyond legacy scoring systems or Google alerts. Expecting individual staff members to monitor this on an ongoing basis would be cumbersome and unreliable. Whatever solution KFCU was to implement had to be in-depth, cost-effective, user-friendly, and allow for rapid, in-depth information delivery to keep KFCU in a proactive mode.
THE SOLUTION: Argos Risk Surveillance
When KFCU Senior Vice President and Chief Operations Officer Jeff Gerard was invited to sit in on an Argos Risk Surveillance presentation, he saw immediately the potential it had for the credit union. “It gives us the ability to really look at a supplier,” he said, noting that they now use Argos Risk Surveillance for their mission-critical vendors. “We can get a comprehensive view of the overall health of a company, and we can compare it to other companies who conduct the same type of business, to get a sense of the overall market.”
KFCU is excited at the level of information that Argos Risk Surveillance provides and how easy the product is to use. They found it to be self-teachable. “You can just jump right in and get the details you need,” said Gerard, He was especially pleased to find much more in-depth information about the privately held companies he needs to monitor. “It’s so easy to use, and you can download whatever you need into many formats—spreadsheets, PDFs.” In the initial reports they were pleased to find that none of the dealerships he monitors were in the “red” zone. “No reds, but lots of yellows,” he said. “And that’s not necessarily bad. Knowing what things have put them in the yellow gives us the opportunity to dig deeper and really understand what’s going on financially for them.” It might be a short-term problem that KFCU can offer customer service assistance with, or it might be a longer-term problem that KFCU wants to be aware of and closely monitoring.
“It really gives us cause to look at that relationship more closely,” said Gerard. Either way, Argos Risk Surveillance gives the credit union an early “heads-up” so it doesn’t become an ugly surprise down the line. There were also dealers who had stellar ratings—one company even scored 99 out of 100, which made the compliance department “very happy!” KFUC also anticipates that NCUA will approve of the Argos Risk Surveillance reporting and alerts systems. “We had a CUNA risk insurer assessment done, and gave the assessor a demo,” he said. “The assessor was very impressed with Argos Risk Surveillance and thought it was very in-depth.” While mission-critical vendors have already been added to KFCU’s monitoring, they would like to see a wider use of Argos Risk Surveillance, particularly in commercial lending, large individual loans, and business partners. “There are so many areas this would provide value,” he said. “As we grow into other forms of business lending, the more information we can get, and the sooner we can get it, all the better.”
Real Value of Using Argos Risk Surveillance Is Long Term Use
Jeff Gerard summarized: “The real value of Argos Risk Surveillance also shows in longer-term use. We have one particular IT vendor that we’ve worked with for several years. Previous due-diligence efforts had never uncovered anything of concern. So we were very surprised to have them show up on a watch list one day. Further analysis raised considerable concern for us.
Founded in 1947, KFCU has grown to 16 branches in Mississippi and three branches in the United Kingdom, and has nearly 190,000 members across those 19 branches. Four of its branches are on Air Force bases, and one is a pioneering branch inside Biloxi High School, where staff provides not only easy access to banking for students, but financial education as well.
KFCU’s commitment to its communities— whether a large loan customer or a firsttime student checking account—is based on the concept of providing excellent service to its member-owners. The efforts put forth towards that service have paid off: KFCU has consistently received 5-star ratings from BauerFinancial. Well known for its affordable loan products, KFCU also offers a full array of financial products, from checking and savings accounts, retirement advice, investment options, and even a weekly publication for its members called “Swap-n-Shop,” in which members can post classified ads. Swap-n-Shop is a popular tool for rounding out KFCU’s community investment.Keesler Federal Credit Union