The Chief Financial Officer

Chief Financial Officer Succession Plan

The purpose of this Succession Plan is to provide a framework for the current Chief Financial Officer to consider in the selection and appointment of a replacement, as may become required, for this top position. This plan is divided into the following sections: Current Essential Requirements; Core Managerial and Technical Competencies essential for success; Characteristics, Traits, and Attributes; various Vacancy Scenarios; Likelihood of Turnover for this and other critical management positions; Importance of managerial and technical competencies by direct reports; the overall Performance Assessment of direct reports.

In no way does this Succession Plan supplant or interfere with Executive Management’s or the Board of Director’s prerogative to select the candidate that most closely fits the requirements and specifications of a the position. Rather, the primary objective of the establishment of this Succession Plan is to provide for an orderly sequence of selecting the best person to assume this role. It can also help to minimize the chance of poor choices or the adverse impact of unplanned vacancies that can disrupt the continuity in the leadership of The Strategic Processes Group.

The Strategic Processes Group is fully committed to its policy of Equal Employment Opportunity. This Succession Plan can also provide the impetus to support the development and future promotion of qualified minorities and females to the highest levels within the organization.

A. Current Essential Requirements

This section is to identify the critical responsibilities for the Chief Financial Officer, the qualifications to consider in the selection of personnel, and some hiring criteria to assist in that selection.

Critical Responsibilities of a Chief Financial Officer

• Supervises assigned personnel, allocates work and makes decisions regarding employment, performance appraisals, training and development, salary recommendations, promotions and transfers.
• Oversees all treasury activities including banking, investment, derivative management, debt issuance, and liquidity management. Ensures the strategies comply with relevant statutes, regulations, and policies including the Risk Management Policy guidelines, the Sarbanes-Oxley guidelines, and Treasury Department procedures.
• Ensure that in-depth testing of internal information technology systems is conducted, as required, to assist other departments improve information technology usage and capabilities.
• Assist management in the development of the strategic direction for and administration of investment, funding, hedging, and liquidity management strategies:

1. Investment strategies to balance risk and return to the SPG.
2. Debt issuance strategies to raise low-cost funds to support advances and investment activity.
3. Hedging strategies to cost-effectively manage risk.
4. Liquidity strategies to meet SPG’s obligations, member credit needs, take advantage of investment opportunities, and meet contingencies.
5. Financial strategies for mission related assets, including the pricing and hedging of all assets.

• Oversees all sales efforts to market products and services to the clients and potential non-client customers. Also responsible for developing and implementing related sales and marketing strategies to enhance the value of membership through an effective consultative sales approach.
• Keeps abreast of current market and industry issues, regulations and policies, and maintains relationships with the dealer community, regulators and industry trade groups.
• Communicate Treasury strategies, policy limits, and performance to Board Committees and senior management. Voting member of Financial Management Committee.
• Communicates a vision for organizational success that motivates others.
• Establishes effective relationships with other senior executives.
• Contributes to strategic planning, supports corporate initiatives, and keeps abreast of critical issues in other divisions/groups.
• Directs and oversees the management in their area of responsibility including all duties and accountabilities as identified in the yearly departmental goals and objectives, while effectively managing expenditures and annual budgets.
• Keeps abreast of current market and industry issues, regulations and policies, and maintains relationships within the community, and industry trade groups.
• As applicable, ensures the SPG’s compliance with federal regulations and statutes, and applicable internal policies and procedures to ensure safe and sound business operations, recordkeeping, and the proper disclosure of required financial, operational, and management information.
• Continually strives to update personal awareness, knowledge and skills in respective areas of expertise. To include, but not limited to, any required certifications of self or staff.
• Strives to achieve maximum customer satisfaction within the guidelines and regulations of the financial industry.
• Ensures that employees receive fair treatment and consideration.
• Assumes and executes additional responsibilities as assigned.

Chief Financial Officer Qualification Requirements

• BA/BS degree with a major in economics, finance or mathematics. MBA preferred.
• 7-10 years of experience in managing investment, funding, hedging and financial planning in a financial institution environment. Prior experience in the marketing of banking products and services required, along with extensive experience in the buying/selling of sophisticated financial instruments.
• Demonstrated high level of leadership and managerial skills with a minimum of 5 years prior supervisory/management experience.
• Demonstrated extensive background in the financial area including financial analysis, financial reporting, asset/liability management and portfolio management with a thorough understanding of the following:

1. Principles and techniques for interest rate risk management, liquidity/investment management, credit risk management, and operations risk management.
2. Capital and money markets including the treasury and agency debt markets, MBS market, and
   fixed income derivatives.

• Experience with sales/marketing is preferred
• Strong ability to improve organizational performance by using effective interpersonal skills.
• Excellent written and oral communication skills.

B. Competency Profile for Chief Financial Officer

The following prioritized core managerial, leadership, and technical competencies are deemed essential for success in this position. There are also some characteristics, traits, and aptitudes that should be considered when filling this position.

CFO Core Managerial, Leadership Competencies, and Skill Sets

1. Deciding

• Making decisions after thorough evaluation
• Deciding a course of action in conjunction with others
• Deciding a course of action on own initiative
• Decisions affecting employment or welfare of people
• Making quick decisions under time pressure
• Mentally reacting quickly to emergency situations
• Ruling on questions of procedure

2. Reviewing / Evaluating

• Evaluating numerical data on organization or dept.
• Evaluating the cost of a project or venture
• Assessing feasibility or practicality of a procedure or process
• Evaluating the practical feasibility of a project
• Reviewing to assess compliance with rules, laws, etc.
• Reviewing progress of a case or project
• Evaluating alternative methods
• Identifying problems in a project design
• Reviewing efficiency of a procedure or process
• Evaluating written reports on organization or dept.

3. Planning

• Revising plans to account for changed circumstances
• Anticipating problems
• Developing strategy in a competitive situation
• Planning a logical sequence of events or tasks
• Ensuring component parts fit overall project design
• Defining objectives for an organization or department
• Planning long term (strategic) objectives
• Preparing a specification for a project
• Planning short term (task) objectives
• Setting up a financial budget
• Formulating or adjusting policy
• Setting priorities for utilizing resources

4. Assessing / Evaluating

• Evaluating the implications of research findings
• Evaluating alternatives prior to choice
• Evaluating information for purposes of recommendation
• Critically examining information for accuracy / quality
• Evaluating the written work of others
• Assessing items prior to acquisition
• Evaluating quality of output of a production system
• Testing a system for correct function
• Assessing the probability or likelihood of an event occurring
• Making a logical evaluation of new ideas

5. Cooperating / Acting as Liaison

• Achieving cooperation from peers, colleagues
• Cooperating on joint projects with other groups
• Acting as liaison between organizations or departments

6. Analyzing / Diagnosing

• Identifying patterns or trends within data
• Analyzing numerical information
• Analyzing written information
• Diagnosing problems in non-physical system/procedure
• Using formalized analysis (e.g., network, critical path)
• Breaking down a procedure into logical steps

7. Influencing / Advising

• Making a spoken case for a course of action
• Advising those other than board regarding policy
• Advising board of directors regarding policy
• Arguing a case in a formal meeting or session
• Making a case to superiors for resources or support
• Setting out arguments for / against a course of action
• Defending a position against critical attack
• Offering professional advice
• Summarizing salient points in debate or disagreement
• Negotiating on points of dispute

8. Controlling / Directing

• Ensuring agreements (legal and / or binding) are adhered to
• Controlling the use of people in meeting objectives
• Directing the implementation of agreed policy
• Authorizing actions
• Ensuring work is within a pre-specified budget
• Controlling non-people resources to meet objectives
• Following up with people to expedite work completion
• Requiring work to be redone to meet specifications

9. Problem Solving / Designing

• Designing a new service
• Brainstorming for new ideas
• Finding new ways to improve the efficiency of an operation
• Devising research methods
• Thinking up new systems or procedures

10. Implementing / Coordination

• Initiating action in emergency
• Allocating duties to others
• Organizing resources to meet an objective
• Allocating resources in emergencies

CFO Technical Competencies and Skill Sets

There are a number of key technical competencies that are deemed essential in the successful management of this position.

1. Achieving and Maintaining Financial Viability

• Understands market and economic factors affecting the strategic plan
• Capital markets expertise
• Thorough understanding of risk management
• Effective allocation of resources
• Establishment of in-depth budgeting processes and accountabilities
• Utilization of appropriate accounting methodologies

2. Customer Focus

• Leverages customer knowledge and insight
• Establishes customer-oriented performance strategic goals
• Plans for and adapts to changing customer relationships
• Understands the needs, drivers, and constraints of stakeholders
• Understands market and economic factors affecting member institutions

3. Developing Talent

• Coaches, mentors, and guides development of employees
• Plans for the development and deployment of talent in the organization
• Supports development of talent throughout organization

4. Business Acumen

• Justifies resource requirements to internal and external stakeholders
• Works with direct reports to find the right priorities to achieve strategic goals
• Allocates and manages human, financial, and material resources effectively
• Consistently reviews costs of doing business and adjusts as appropriate

5. Innovation

• Models creative thinking and innovation
• Challenges the status quo
• Builds organizational readiness for change
• Champions implementation of new systems and technology

6. Building Alliances

• Represents SPG’s positions effectively to stakeholders
• Understands the organization’s impact on stakeholders
• Fosters networks, alliances, and other business relationships
• Builds and maintains external stakeholder trust and confidence

CFO Characteristics, Traits, and Attributes

The following are the tendencies or work styles associated with someone who has been successful in this position. The tendency is toward the higher range of the attributes as illustrated below:

Essential

• Assertiveness
• Decisiveness
• Competitive
• Resilience
• Team Orientation
• Detail Consciousness

Important

• Adaptability
• Social Confidence
• Excellent in Forward Thinking
• Achieving
• Innovative
• Emotionally Controlled

Analysis of Current Capabilities by Job Title

As part of the succession planning process it is important that we accurately assess our direct subordinates’ capabilities and be able to compare that to what is required for success on the job. The ensuing gap analysis can then become the basis for individual development whether that is for improvement in current job function or preparation for the next upward position. The suggested grading system is a follows: (See Addendum A Chart)

Awareness
Has cognizance of basic principles, rules, policies, procedures, or information but would not be able to discuss with any amount of confidence. Typically the individual is in the unconscious-incompetent learning stage and does not know what they do not know.

Knowledge
Has familiarity with the principles, rules, policies, procedures, or information and can discuss with confidence. Usually has demonstrated that knowledge on at least one occasion, but is not yet skilled in its effective usage. There they can be considered in the conscious-incompetent stage of learning.

Skill
Has successfully demonstrated capability to perform the function on more than one occasion but is still in a conscious-competency learning stage and therefore must think about every step while performing the task or discussion. They are now in the conscious-competent learning stage.

Proven Expertise
Has successfully performed the function on numerous occasions and can be viewed as someone who can assist others. Has achieved unconscious-competence and has fully internalized the process as shown by the observable habits and behaviors.

Vacancy Scenarios
The vacancy of the Chief Financial Office is one of the critical scenarios for most organizations. It is therefore even more important that a comprehensive plan be in place on how that position is going to be filled. The following represents how that may be accomplished depending on the amount of time allowed to find a replacement.

Vacancy with no time notice – Sudden Resignation or Death

A. In the event the need arises to replace the Chief Financial Officer (CFO) due to a sudden resignation or death it is recommended that the Director of Member Services and Treasurer handle the day to day activities with oversight by the Chief Executive Officer on critical issues. Furthermore, a formal notification consisting of a press release with a copy of a completed Form 8K shall be made to the Security and Exchange Commission

Since neither direct report currently can assume the overall principal responsibilities, accountabilities, or requirements for the position, it is suggested that the CEO engage an executive search firm to assist in conducting the search for a new Chief Financial Officer. Such search firm will review resumes, interview selected candidates for the position, perform background and reference checks, and conduct such other activities as instructed. Upon the completion of the interview process, the Chief Executive Officer will present a review of the final candidate(s) to the full Board of Directors.

Vacancy with time notification due to Retirement or Termination of the Chief Financial Officer:

B. In the event of an announced retirement or the removal of the CFO, the Chief Executive Officer shall within 15 business days of said event will determine if either of the current direct reports has achieved sufficient knowledge, experience, and expertise to assume the responsibilities of the position. If not, it is recommended that the Director of Member Sales and Treasurer report directly to Chief Executive Officer until such time a successor has been chosen and has assumed the duties of the position. Furthermore, a formal notification consisting of a press release with a copy of a completed Form 8K shall be made to the Security and Exchange Commission

As set forth in Paragraph A both direct reports will handle the day-to-day operational duties with oversight by the CEO until a successor has been chosen and has assumed the responsibilities for the position.

Vacancy with uncertainty of time factor:

C. Incapacity of the Chief Financial Officer: In the event the CFO is unable to perform the executive duties of the position for a period of time in excess of 45 consecutive days due to medical incapacity, or for any other reason, it is recommended that paragraph A be enacted until the CFO can return to full duties.

D. Identification of potential internal successor candidates: The Chief Financial Officer shall annually update the CEO as to the status of those potential internal candidates that may be possible candidates to succeed him or serve in the capacity of CFO. Furthermore, the CFO will also identify the developmental status of other group personnel as to their capability to assume more responsibility or a higher position. This update will be conducted either verbally or in writing, as directed by the Chief Executive Officer.

Vacancy Probability of Current Position and Direct Reports

To ensure the best selection of replacement for this position, it is critical to determine the probability of turnover for this position and potential candidates for the position. The following represents the current office holders and the best estimate of possible turnovers.

Annual Review of Succession Plan

In order to continually improve upon and update this Succession Plan, Executive Management and the Human Resources Committee of the Board of Directors are to review this document on an annual basis. One of the anticipated results of this review is to prioritize the best practices and lessons learned and incorporate these into the ongoing operating strategies.