Your Real Strategy Is Risk Avoidance (Even If You Won’t Admit It)
By Kevin Smith
If you asked your credit union board to describe its strategy, you’d likely hear words like growth, innovation, member-centric, or future-ready. No one ever says, “Our strategy is to avoid risk at all costs and hope nothing bad happens on our watch.”
And yet.
If we’re being honest—and governance works better when we are—many credit union strategies quietly default to risk avoidance. Not because boards are lazy or disengaged, but because avoiding risk feels responsible. It feels safe. It feels like the kind of thing a regulator would nod approvingly at while flipping through your exam report.
Unfortunately, risk avoidance is still a strategy. It’s just rarely the one boards think they’re executing.
The Strategy You Get When You Don’t Choose One
Risk avoidance rarely shows up as a formal board resolution. It emerges slowly, almost politely.
It sounds like:
- “Let’s wait and see how this plays out.”
- “Other credit unions are doing it—let’s see how it goes for them first.”
- “We don’t want to get ahead of the regulators.”
- “This feels like a distraction from our core business.”
Individually, these statements seem reasonable. Collectively, they form a strategy of inertia. Over time, the credit union becomes very good at not doing things. No failed pilots. No uncomfortable conversations. No bold moves that might require explaining later.
The board doesn’t explicitly decide to avoid risk. It just consistently chooses the least controversial option available. And eventually, that is the strategy.
Remember how Tim Harrington puts this – “There’s risk foolishness, and risk intelligence.” There’s a way to do this intelligently while taking on the risk in your approach, rather than avoiding it altogether.
When “Being Careful” Becomes the Business Model
Credit union boards are, by design, conservative. You are fiduciaries of member assets. You’re not supposed to gamble. That’s good.
The problem arises when caution stops being a filter and becomes the destination.
Boards that lean too far into risk avoidance often share a few traits:
- They spend far more time discussing what could go wrong than what could go right.
- Innovation is something management “brings back later with more detail.”
- Strategic discussions end with no decisions, but lots of appreciation for the conversation.
- The phrase “that’s not how we’ve done things” is treated as wisdom rather than a warning sign.
Ironically, these boards often believe they are being strategic simply because they are thoughtful. But thoughtfulness without action is just well-documented hesitation.
The Risk No One Puts on the Heat Map
Here’s the uncomfortable truth: boards are very good at tracking certain kinds of risk—credit risk, liquidity risk, compliance risk. There are dashboards. Color-coded charts. Reassuring acronyms.
But there’s one risk that rarely gets equal treatment: the risk of doing nothing.
What is the risk of:
- Not modernizing your delivery model while member expectations evolve?
- Not addressing declining relevance with younger members?
- Not investing in talent because it feels expensive?
- Not exploring partnerships because they feel unfamiliar?
These risks don’t trigger examiner findings. They don’t show up in next quarter’s numbers. They unfold slowly, quietly, and with remarkable patience.
By the time they’re obvious, the board often says, “This came out of nowhere.” It didn’t. It just wasn’t on the agenda.
Regulation as a Convenient Excuse
Let’s talk about the regulator in the room.
Yes, credit unions are heavily regulated. Yes, compliance matters. And yes, no one wants to be the board that explains a preventable problem to an examiner.
But sometimes “the regulator won’t like it” becomes a catch-all excuse for avoiding difficult strategic decisions—especially when the real issue is uncertainty, not prohibition.
Many boards don’t ask, “Is this allowed?” They ask, “Could this possibly create discomfort?” Those are very different questions.
Regulators generally expect boards to manage risk, not eliminate it entirely. When boards confuse compliance with strategy, they unintentionally shrink the organization’s future to the size of its last exam.
That’s not safety. That’s stagnation with good intentions.
Innovation Theater and Other Safe Performances
Some boards respond to this tension by engaging in what might be called innovation theater.
There are presentations. There are task forces. There are discussions about “keeping an eye on trends.” Sometimes there’s even a pilot project that never quite scales.
This creates the appearance of forward thinking without the inconvenience of real change. Everyone can feel progressive without actually taking responsibility for outcomes.
Innovation theater is comforting. Real innovation is messy, uncertain, and occasionally unsuccessful. One of these aligns better with risk-averse cultures than the other.
What Risk-Tolerant Strategy Actually Looks Like
To be clear, this is not an argument for reckless decision-making. It’s an argument for intentional risk-taking.
Boards that align risk and strategy tend to do a few things differently:
- They explicitly define their risk appetite in plain language, not just policy documents.
- They evaluate opportunities alongside the risk of inaction.
- They expect management to bring forward options, not fully risk-neutralized proposals.
- They treat learning from failure as part of governance, not a breach of trust.
Most importantly, they recognize that avoiding all risk is itself a high-risk position in a changing financial services landscape.
The Question Boards Rarely Ask (But Should)
Here’s a question worth adding to every strategic discussion:
“What are we choosing not to do—and what does that choice cost us?”
This forces the board to acknowledge that declining an opportunity isn’t neutral. It’s directional. It shapes the credit union just as much as a bold initiative would.
When boards fail to ask this question, they quietly accept a future that looks a lot like the past. Which feels comfortable. Right up until it doesn’t.
Final Thought: Honesty Is a Strategic Asset
Risk avoidance isn’t a moral failing. It’s human. It’s understandable. And in moderation, it’s responsible.
But when boards refuse to acknowledge that fear and caution are driving strategic outcomes, they lose the ability to course-correct.
The most effective boards aren’t fearless. They’re honest—about tradeoffs, about uncertainty, and about the fact that every strategy involves risk, including the strategy of standing still.
Because at the end of the day, “We played it safe” is rarely the legacy boards intend to leave behind.
