The banking crisis that began with the closure of a Silicon Valley bank has opened other cracks in everything from the fragility of the global financial system to the risk aversion of the Fed’s approach to inflation to the fragility of the engine of innovation that is powered by the US. Digital-tech giant for a quarter century.
That means the time has come for CEOs to look beyond the immediate wreckage and looming new threats and exercise some of the core muscles of their job: strategic vision, tactical guile, and a focus on how to get past the horizon. be done which may look different from this. Just a few weeks back.
“We were on track to reschedule anyway, given rising interest rates and the revaluation of tech companies,” said Greg Cohen, CEO of embedded-payments company Fortis. “It is, in part, a return to business fundamentals that will favor companies that are profitable and that have a better trajectory toward profitability than growth at all costs.”
Among the actions company heads should take: Working with their CFOs and boards to ensure the strength of their coffers now and in the future. Other possibilities include taking advantage of the new uncertainties to better position their companies in a broader sense. Here are some thoughts from CEOs, financial experts, management consultants and big thinkers:
• Buttonhole Capital. Conserving cash is critical for the next few weeks and months as the economy and your company navigate a suddenly more treacherous landscape — and this was after dealing with an initial potential recession.
“I’m encouraging all business owners to stay close to their sources of capital,” said Craig Sheff, CEO of Texas Security Bank in Dallas. “Ask your bank whether it tests its own credit lines for backup liquidity and knows whether they are available and, if so, what percentage of deposits does the availability of those lines represent?”
One possibility, Sheff said, is examining cash-management platforms such as IntraFi ICS, a service that allows thousands of banks to transfer company funds in increments of $249,000 as required to receive the amount covered by FDIC insurance. allows it to spread. Complete. The cost is about 15 basis points, he said.
In any case, see what your bank or banks can do. “Can you negotiate with your bank to maintain additional FDIC insurance?” said Michael Tomasulo, senior managing partner at Baldwin Risk Partners, a risk-management firm. “Do you carry it, and can you do it in our scenario?”
• View the repository again. This includes asking your CFO to re-examine the liquidity of credit facilities and credit lines, both on an immediate and longer-term basis, especially given that the course of the economy is still difficult – and that the current financial The upheaval could send it into recession. Which America has been avoiding till now. “Gap analysis”, especially the investigation of weaknesses, should be an emphasis.
“This is an opportunity to look at risk-management processes and dust off the policies around treasury management,” said Michael Hayes, financial-services team leader for PKF O’Connor Davis Accountants. “Not a finger-pointing exercise, but looking at existing policies and procedures and finding points for improvement and weaknesses.”
• Rethink banking relationships. Diversify your banking relationships by accessing options including non-bank lenders for short-term bridge loans to support critical payment needs, if necessary.
Regional and community banks should also be part of that idea, despite the stain that SVB’s over-reliance on tech companies has left on mid-sized and smaller financial institutions in the San Francisco Bay Area.
“Often these regional banks have missions that allow you to get access to capital or other financial services,” Cohen said. “Also, the extent of having a ‘relationship manager’ in a big bank is very different than in a smaller bank. One more thing: you can’t just shop online for financial services unless you know exactly not what you want. And to guide you about all the different avenues you have to make money, to find ways to open up new markets, you have to have a relationship with them. You don’t know that you do not know what.
Cohen concluded: “It would be a bad thing for the world if there were only two banks in the United States that managed everything.”
With the prospect of the federal government freezing deposits and buying up bank loans, some CEOs are even rallying for the failed regional institution that fueled the current disaster.
“most of [the bank’s] The services are up and running and they are also honoring existing loans,” said Lana Feng, CEO and co-founder of startup Huma.ai. “They really made this difficult period bearable and showed us again why we love SVB as a startup partner. We wish SVB to survive in some form or another.”
• Maintain communication. Keep the lines of communication open with all your financial partners. PJ Gupta, CEO of Checkbook, a digital-payments platform startup backed by JP Morgan, said, “CEOs and CFOs must collaborate with banks as well as their customers, investors and even regulators to build trust and transparency.” To be.” “Nothing speaks volumes about a company’s efforts to support its customers in times of crisis than clear communication from the CEO or founder.”
• Station Sentry. Companies should always have a 13-week cash-flow forecast and consider stress-testing scenarios for how the next 13 weeks might play out.
“Especially now,” said the chef. “The businesses we are talking to are seeing a slight slowdown. What he forecasts is looking around corners. If you understand how your inflows and outflows behave, it will show you the benefit of time as well as some things down the line that you can address.
• Ensure accountability. One lesson from SVB’s failure under CEO Greg Baker is that chiefs must ensure discipline and a strong sense of responsibility in the C-suite.
“A long-serving CEO may have an exceptionally high level of trust in lieutenants and subordinates,” said Konrad Alt, partner and co-founder of Claros Group Advisors. “The lesson for other CEOs is, even if you have great lieutenants and you trust them and have seen them handle difficult situations before, you still have to tolerate their work and ask the tough questions, and make exceptions.” Have to endure. They need attention, and they need to know you’re paying attention.”
• Activate innovation efforts. The collapse of Silicon Valley’s startup-financing ecosystem means that many small companies are stuck in the lurch, with lots of expertise, well-developed ideas and products that only need support to complete their march to commercialization. Is.
“So get involved in the startup ecosystem and find some assets that might be a little undervalued and partner with them or acquire them,” suggested Andrew Binns, director of Change Logic and advisor to the cofounder and CEO. “SVB has played a really important role in connecting companies to the ecosystem at critical moments in their growth, so there are now some real crown jewels in Silicon Valley for corporations to take on. And there is talent.
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