CU Data

Be Prudent When Exercising Caution

Excess caution impedes success.

May 10, 2013
KEYWORDS caution , consumers , data , risk
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My predilection to embark on dictionary forays prompted me to compare the definitions of “prudence” and “caution.”

Today, people often use the words interchangeably.  However, a slight distinction exists. 

Per the explanation at askdefine.com, “…prudence is the exercise of sound judgment in practical affairs” but when used synonymously with caution, prudence “…names a reluctance to take risks, which remains a virtue with respect to unnecessary risks, but when unreasonably extended (i.e. overcautiousness), can become the vice of cowardice.”

Consider, then, that the over-application of prudence, which is caution, is the result of fear; risk aversion.

Risk aversion is detrimental not only in managing investments, but also careers, as illustrated in a recent Forbes article. “Fear…left unchecked [will] spread like a virus—infiltrating every aspect of our lives, our relationships, and the organizations we work in,” hampering the ability to apply “risky” decisions potentially resulting in greater security. 

“The same occurs on an organizational level, stifling innovation and impeding an organization’s ability to adapt to change and seize the opportunities it brings.”

To progress and prosper, we need to take prudent risks without falling victim to excessive caution.  Forbes identifies five necessary risks to take:

·         Risk making an error; decisiveness trumps uncertainty.

·         Speak candidly.

·         Challenge assumptions with willingness to learn.

·         Risk rejection; flout conformity.

·         Speak up; let others know what you do and who you are.

“Who makes quick use of the moment is a genius of prudence.” –Johann Kaspar Lavater, Swiss poet.

Examining public perception and the experiences of banks and the financial services industry is prudent to remain competitive.  Throw caution to the winds!

Consumers Want a More Seamless and Personalized Customer Experience from Their Bank,” says the Cisco Customer Experience Report.  Overall, 69% of American consumers want simplified financial services.  Further, consumers are willing to “provide more private information in exchange for more personalized service, higher security against identity theft, and greater simplicity in managing their finances.” 

With regard to virtual connections to financial providers, U.S. consumers hold these prudent beliefs:

·         63% are willing to communicate with providers via technology rather than in person.

·         48% expressed comfort acquiring a mortgage through technological means.

·         21% would prefer smartphones for video interactions; 79% choose computers.

·         46% would open an account with a bank that is completely virtual if the bank offered the best and more secure service.

“…Banks are struggling to fashion a value proposition that resonates with customers in today’s environment,” claims a Gallup Blog post.  Here we realize four of ten disagreed or remained neutral when asked if their primary banks provided “’excellent’ overall value for the rates and fees they are charged.”

Demonstrating value is difficult for providers challenged with regulatory requirements and necessary imposition of additional fees.  However, providers “reap major rewards” when consumers realize the value in providers’ services, as happy customers use additional products and services. 

Suggestions for demonstrating value are provided in this thought-provoking commentary.

Investment Banks Face Tough Battle to Survive and Thrive,” according to the Boston Consulting Group in a similar investigation.

“Investment banks, facing onerous regulatory constraints and a more intense competitive environment, need to make difficult choices on a number of fronts if they hope to raise lagging returns on equity and convince both investors and corporate boards…of their ability to deliver value.” 

Examine core business models.  Banks “need to revamp their operating models to reduce costs and increase efficiency.”  The report analyzes key market developments and presents advantageous business models.

Successful banks share their secrets for downturn survival in a St. Louis Federal Reserve paper. “The results of this investigation offer insights into the nature of the business plans that allowed many community banks to remain successful during a financial crisis and major recession.” 

The conclusion is: “The community banks that prosper in the future will have…strong commitments to maintaining standards for risk control in all economic environments and plans that work for their individual markets.”

In these studies, it seems apparent that thoughtful planning and careful examination of challenges are prudent courses of action; hesitating to respond to consumer demand and the economic environment is risky.

“I believe in practicing prudence at least once every two or three years.”  --Molly Ivins, newspaper columnist.

It might be prudent to consider application of analytics more often than annually, contrary to Molly’s philosophy.  Might this practice contribute to a value proposition for your members?

A Marketing Profs blog identifies the prudence in use of social networking analytics tools.  “Understanding the key elements that influence consumer behavior on specific channels can help brands to focus the direction of their content,” claims the post. 

The blog examines analytical devices provided by Facebook, Twitter, Google+, Pinterest, and LinkedIn. 

Most marketers are using social media in some shape or form, but what’s the return on investment?” questions a BtoB article.  Here “96% of marketers are using some type of social media, only 41% reported that they made any attempt to measure social’s return on investment...” 

Organizations often don’t know how social media supports their objectives, and don’t know which metrics to use.  Once data is identified, users need to know what to do with it.  The article presents techniques for optimal use of social marketing efforts.

More analytical news as “Bankers, Insurers Link Big Data with Marketing,” says eMarketer.  “Nearly six in 10 from the banking sector thought that Big Data was simply a fashionable term for the data analysis the company was already doing…Still, 90% of respondents from both sectors thought that the adept use of Big Data would help financial services companies succeed in the future.”

Consider the benefits of risk before taking any drastic action.  Know that it’s prudent to use analytics in understanding the competition.  Excess caution or fear of the unknown impedes success.

As English writer Charles Caleb Cotton noted, “There is nothing more imprudent than excessive prudence.”

 

 

 

 

 

Lora Bray is a research librarian at CUNA.

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