Demystifying the CU Risk Index: A Look Under the Hood

In an era of information overload, credit union leaders are faced with a significant challenge: how to transform mountains of raw call report data into a clear, actionable strategy. It’s easy to get lost in individual metrics, but it’s much harder to see the big picture—to understand how your institution’s performance truly stacks up and where the hidden risks and opportunities lie.

This challenge is precisely why we created the Glatt Consulting CU Risk Index.

While many of our partners are already using the Index to drive strategic conversations, we often get questions about what’s “under the hood.” This post is designed to answer those questions, providing a transparent look at what the CU Risk Index is, how it’s built, and why it represents a new way of thinking about performance.

From Health Score to Risk Index: An Evolution in Thinking

Many of you may be familiar with our precursor model, the CU HealthScore. For years, it served the industry well by providing a straightforward snapshot of an institution's overall health. However, as the financial landscape grew more complex, we recognized that leaders needed more than a static check-up. They needed a dynamic tool to navigate future uncertainty.

The CU Risk Index is the result of that realization. It is not just an update, but a fundamental evolution. While descended from the HealthScore, the Risk Index is a far more robust assessment model. Its purpose is not just to rate health, but to provide a precise, multi-dimensional understanding of relative risk—a measure of your credit union’s standing against the entire industry, both past and present.

The Engine of the Index: Our Methodology

At its core, the CU Risk Index is designed to provide clarity and objectivity. That commitment is reflected in every aspect of its construction.

• A Comprehensive Data Foundation: The Index is powered by an extensive historical dataset, leveraging over 500,000 observations per ratio. This massive foundation ensures statistical robustness and provides a true, unbiased benchmark for industry performance.

• Twenty-Two Critical Financial Ratios: We systematically analyze 22 carefully selected ratios. These aren’t arbitrary; they are chosen for their universal applicability to all credit unions and are grouped across six categories vital to institutional health: Capital Adequacy, Earnings, Asset Quality, Liquidity, Member Relationship, and Growth.

• Objective, Tiered Scoring: The Index uses a clear, intuitive 4-tier scoring system where a Score 1 indicates the lowest risk and Score 4 signifies the highest. The power of this system lies in how the tiers are defined: they are set by historical percentile cutoffs from our vast dataset. This removes subjective judgment and provides a transparent, data-driven assessment of your relative risk.

More Than a Number: What the Index Reveals

A single number can only tell you so much. The true value of the CU Risk Index is the context it provides.

When your credit union receives its score, you’re getting more than a grade. You’re gaining a powerful new perspective that allows you to:

1. Benchmark with Confidence: Instantly see how your risk profile compares to the industry average, top performers, and historical trends.

2. Identify Trends Proactively: The Index helps you spot subtle shifts in performance—both for your institution and the industry—allowing you to make strategic adjustments before a potential issue escalates.

3. Foster Smarter Conversations: The Index provides a common, objective language for your board, executive leadership, and management teams. It grounds strategic planning and risk management discussions in quantifiable data, leading to more confident and effective oversight.

In short, the CU Risk Index is designed to be a strategic compass. It helps you cut through the noise of raw data to find the one thing that matters most: the signal that guides your next move.