Pub. 8 2018-2019 Issue 2

20 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S 6 7 8 can introduce unneeded risk or lead tomediocre, dogma-driven action. Have you ever system- atically analyzed your past decision methods to assess the appropriate level of confidence to place in them going forward? They say hindsight is 20/20, but that’s only true if you actually look. Constraints Must Be Addressed You have real constraints – and imaginary or out - dated constraints – holding you back. Ruthlessly challenge your constraints and quantify their costs. When it comes to opportunities, start with the unconstrained possibilities, and then only grudgingly accept value-diminishing constraints, no matter how business as usual they are. Price and Value are Different Things We know this in our personal lives, but we often mistake price for value in the finance arena. Mar - ket inefficiencies exist, and in the space between price and value lies the potential opportunity to outperform. To make use of this difference, however, one must have a methodology for dis- tinguishing between them. Decision-making FrameworksMust Be in Sync What terms should you offer on a CRE loan? Is balloon date an interest rate risk concern or a credit concern?What is the relationship or trade- off between these concerns? The chance is, these decisions get made in one committee or the other, and are never brought into common alignment. They should be. Obviously, in a short article, we can only scratch the surface of this topic, but the hope is to motivate much more thinking along these lines in your daily business. Decide tomake better decisions; decide tomake more money. The application of these eight principles can be improved within almost any bank, regardless of asset size. Don’t be daunted by their number; pick one and attack it today. n Philip Nussbaum is a co-founder and chairman of Perfor - mance Trust. His passion is to help asset liability managers outperform by applying a disciplined, well-quantified risk/ reward decision-making process. Prior to Performance Trust, he was a vice president at Clayton Brown & Associ - ates and a senior examiner with the Financial Markets Unit of the Federal Reserve Bank of Chicago. Eric C. Brown is a managing director at Performance Trust and is a familiar voice on the firm’s Level Playing Field® webinar series, which is aimed at helping depository exec - utives achieve great performance. Previously, he served as CFO, chief strategy officer, ALCO chair, and inside director for a $2 billion community bank. He has past experience as a naval officer and an engineer.