What Ingredients Make a Good Policy?

December 11th, 2017 by James Atkinson

The holidays are times for special meals and the cooks all have their special ingredients. Years ago, during the holidays my grandmother made fruitcakes and always had to go to a certain store where she purchased by the pound all the ingredients she deemed necessary to make that special holiday fruitcake. In the South, two things eaten in all households on New Year's Day are collard greens and blackeye peas and you probably don't want to hear about the one ingredient that makes those collard greens taste so good.

The end of the year or start of the New Year typically means time for the annual policy approvals by the Board. But just what are the ingredients of a good policy? Thickness and weight – because that fills things up? Well, unfortunately, sometimes I have seen that be the case. It is amazing the times I have taken a thick and heavy policy purchased by an institution from a vendor that has passed many regulator and independent exams successfully; yet, that policy in no way fits what that institution is doing or their systems. I think it passes because no one wants to read a 400 page policy. Well, maybe it got by the exam, but do you feel you got your money's worth if part of the policy references systems not used by your institution in years? Or do you feel that policy really benefits your staff who are supposed to use it as a guide if it is so thick and heavy and is of no use as reference and is not aligned to your institution in terms of systems and processes?

Hence, looking at the ingredients of a good policy then:

  1. It should be compact and usable designed to fit your institution, its processes, and its systems.
  2. It should be updated as regulatory and system requirements changes.
  3. It should be accessible (these days an easily located reference on your institution's intranet). What good is a policy if no one knows how or where to find it?
  4. It should be indexed so that users can easily find the area they want to research. If someone in Loan Servicing wants to know about the recent loan servicing elements applicable to their institution they need to be able to find it in a policy section titled "Loan Servicing".
  5. It should begin with regulatory background information.
  6. It should outline responsibility, disclosure, and reporting requirements.
  7. It should discuss responsibility for and timing of training.
  8. It should discuss monitoring.
  9. It should tie in to the Customer Complaint Program.
  10. It should discuss Record Retention.

Paying attention to these simple ingredients should ensure a good policy for your institution versus one that is filling but really not all that good. It's the holidays, folks, we want grandmother's fruitcake not the filling fruitcake from the supermarket!!!