3 Things We Learned About Crisis Management from the Collapse of SVB

The dust from the Silicon Valley Bank collapse is nearly settled, but as we look at the new landscape, we need to take a hard look at what can be learned from it. For the good of us all, I want to shorten the learning curve and lay out the three biggest things we learned from the SVB collapse about crisis management and what an organization needs to do to protect its reputation, business, property, financial standing, employees, board, community, and customers. And this isn’t only for banks.

Know Your Risk

Crisis is born from risk. Even the most risk-averse and cautious executives still bear some sort of risk every day, and a crisis can be born from the most minimal of risks. As we think about risk, we broadly categorize them as strategic, preventable or external. A fourth category, social risk, is a hybrid with elements of all three. 

1. Strategic – risks taken that offer a return. These likely have lots of thought put into them with an aim of growth or disruption. Pepsi Co’s recent introduction of Starry lemon-lime soda (or pop to me) is an example. This is their fourth foray into this area of the market to compete with Sprite and 7-Up. We will soon know if this strategic risk is worth it.
   
2. Preventable – risks that rise from within your organization or ecosystem. They are preventable as the name implies but also foreseeable. Taking away security precautions to speed up delivery and to cut costs in the transportation industry, or not investing in enough cybersecurity if you are dealing with people’s information – these produce preventable crises.
   
3. External – uncontrollable risks like tornadoes, political turmoil, but not all are unforeseeable (interest rate hikes, hurricanes).
   
4. Social – Social risk involves grappling with political and societal issues with elements of strategic, preventable, and external risk.

What we saw with the SVB crisis was initially a combination of strategic and external. It was a strategic decision to invest as heavily in the bond market as they did, and the rise in interest rates was external although foreseeable. Interest rates rose in steps, so I would add that SVB’s crisis was also preventable – they should have foreseen their own precariousness.

I will leave the financial dissection for those with the letters MBA or CFO after their names and their risk managers, but the operational crisis started with silos and two key missteps: not understanding the full scope of crisis management and not having the keepers of the brand at the table. 

C in C-Suite stands for Crisis

A reputational crisis is not financially or operationally inconsequential. Your corporate reputation has tangible value in the face of your industry and your financial backers be them investors, partners, or customers. Some respected estimates put reputation between 35-50 percent of your value and the ultimate authority, the IRS, says so. Operationally a reputational crisis will knock you off your game and disrupt whatever business you are in. Any way you look at it, it costs you money.

Protecting your company’s reputation is the C suite’s responsibility and doesn’t start the moment you realize you have a crisis. Beyond setting the tone that handling a crisis is about preparation, your leadership team needs to dedicate budget to a crisis team, crisis exercises and crisis planning; create a structure that mandates cross-functional cooperation; and ensure that you have a crisis team that is made up of decision-makers who know their roles.  

If you have a properly constructed crisis management operation, the other things will materialize because you have a core group of people sitting at the decision-making table that have the health and longevity of your company as their top priority. 

A CCO is the magic ……

The SVB CEO uttering the words “stay calm” had the opposite effect. Depositors panicked and withdrew all of their money. I will put it simply: if you don’t have your head of communications at the executive table, you are working with one hand tied behind your back. In the SVB example, there was not a communications expert sitting at the executive table. The organizations most highly attuned to handling a crisis have communication experts at the crux of strategy.   

Good communicators look around corners (The technical term is second-level thinking.) and see the full landscape because that is part of their expertise. It is their job to anticipate what is lurking in the shadows on all fronts because they will be brought in to clean it up.  Even though communications doesn’t have a P&L, it is the team in charge of protecting and growing your most valuable assets – your reputation. 

And while, not every crisis starts out as a reputational threat every crisis is a reputational threat and a solid communications strategy is an essential component of being ready. So here is a recipe: good communication professionals + seat at the table = step 1 of crisis preparedness and risk mitigation.

One Last Thing

If you don’t have government affairs in house or a firm on retainer, highly consider it. The most recent crises, namely SVB and Norfolk Southern, have prompted government investigations and Congressional and state attention. An investigation and televised Congressional hearings prolong the crisis and can have far rippling ramifications. 

And while they are not necessarily a traditional member of a crisis team, ensure that there is a pathway for their consul and expertise to be factored into a decision. 

Don’t Be the SVB of Your Industry

There is not a single industry known that doesn’t face some sort of crisis in their business. If you, as a leader, haven’t already, you will. Ensuring that you have all the right people and tools in place is important, but the bottom line is that being ready to handle a crisis is about mindset. 

The mindset that being prepared and having the right tools in place is a worthwhile investment for your company. Recovering from a crisis, if it’s even possible, will cost a lot more than preparing for it.

Written by Stephanie Craig.
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