The 65% Advantage

In credit union leadership, risk management is often viewed through a defensive lens: a necessary practice to avoid failure and satisfy regulators. But what if we could reframe it? What if, instead of just avoiding negatives, we could measure and manage our journey toward positive, quantifiable resilience?

The CU HealthScore is designed to be more than a passive rating—it’s an active management tool. Grounded in rigorous statistical analysis, it provides a single, game-changing metric that allows leaders to connect operational improvements directly to a massive reduction in risk: the 65% Advantage.

Beyond a Simple Score: Quantifying the Impact of Health

For decades, leaders have pursued strategic initiatives—upgrading technology, refining underwriting, improving efficiency—with the general goal of making their institution "healthier." But the precise impact on long-term viability has always been difficult to quantify. We are often left with correlation, not causation.

This is where the HealthScore analysis provides a revolutionary breakthrough. The logistic regression model used to validate the score produced a key metric called an odds ratio. This analysis revealed that for each one-point increase in a credit union's HealthScore, the odds of it failing within the next year are reduced by approximately 65%.

Let that sink in. This isn’t a vague correlation; it's a precise, multiplicative measure of impact. Improving a credit union’s score from a 3 to a 4 doesn't just make it "better"—it fundamentally changes its risk profile by slashing the odds of failure by 65%.

Turning Risk Management into Proactive Strategy

Understanding the 65% Advantage transforms risk management from a defensive chore into a proactive, ROI-driven strategy. It allows leadership and boards to make better, more informed decisions in three key areas:

• Justifying Resource Allocation: How do you decide between two major projects? The 65% Advantage provides a framework for cost-benefit analysis. If an investment in a new lending platform is projected to improve component scores enough to lift the overall HealthScore by a single point, you can now frame that investment as a direct 65% reduction in your institution's failure odds.

• Setting Tangible Goals: Vague goals like "improve our health" are replaced with specific, measurable, and impactful targets. A board can now set a clear objective: "Our objective for the next 18 months is to raise our HealthScore from 4.5 to 5.5." The 65% figure gives this goal immense weight.

• Communicating with Stakeholders: When speaking to your board, examiners, or even your own management team, this metric is exceptionally powerful. It clearly and concisely communicates the value of your strategic initiatives in the language of risk reduction. It moves the conversation from "we are making improvements" to "we are measurably reducing our risk of failure by a significant margin."

Conclusion: Your Most Powerful Lever

The HealthScore is built on a foundation of trust. It is the result of a rigorous statistical analysis of failed and surviving institutions and has been validated as an "excellent" predictor of risk. The 65% Advantage is the most powerful takeaway from that analysis.

We encourage you to look at your HealthScore not just as a grade, but as a starting point. It is your most powerful strategic lever for building a stronger, more resilient, and more successful institution. Every initiative you undertake to improve your performance now has a quantifiable impact on your long-term viability—a 65% advantage waiting to be seized.