SVB insights from NeuGroup founder Joseph Neu and senior executive advisors Paul Dalle Molle and Jerry Olivo.
Financial crises like the failure of Silicon Valley Bank reveal the grit, dedication and skill of first-rate treasury and finance teams—and their ability to manage risk when battling forces they can’t control. Upheaval, volatility and uncertainty also test the mettle of NeuGroup, whose mission is to help members, sponsors and partners withstand the blows.
- Hours after regulators shut down SVB last Friday, the NeuGroup team ran an hour-long session where more than three dozen members shared what they knew and what they’d done so far. They answered each other’s questions and provided a path for their peers through the fog.
- The Silicon Valley Bank Crisis Community session and two others have been hosted by senior executive advisor Paul Dalle Molle, a former head of technology banking in North America at Societe Generale.
- In a video clip you can watch by hitting the play button below, Paul offers his observations on a bank failure that he says did not have to take place, as well as takeaways from hearing how members have navigated the crisis and lessons the collapse of SVB holds for corporates and their finance teams.
Deep bench. Paul is one member of a NeuGroup bench deep with talented individuals with a wealth of experience in banking and capital markets who have stepped up to connect and help guide members dealing with the fallout from SVB’s collapse.
- They include Jerry Olivo former head of intraday liquidity at Citi treasury, senior director Scott Flieger (formerly of Deutsche Bank) and director Chris Hall (Mizuho, Deutsche Bank).
- Jerry’s observations include this take on SVB’s shortcomings and the run on the bank: “Every bank with meaningful corporate and institutional deposit levels should be monitoring depositor concentration risks. This was a discussion topic at each of Citi’s Institutional Client Group ALCo (asset and liability committee) meetings.
- “Also, this is where management skill comes into play. There’s no historic model out there that could be relied upon to forecast the very unique monetary and fiscal environments of the recent past, but common sense should suggest that if concentrated deposits build up as fast as they did, they could also exit at an accelerated pace and should be invested accordingly.”
Running the team. Overseeing the NeuGroup team’s response to the SVB crisis is founder and CEO Joseph Neu, whose experience guiding members during tough times includes the Great Financial Crisis of 2008. Here are some of his insights on the SVB debacle:
- There is a need for cross-organizational collaboration during the developing banking crisis. Treasury has to work with AR to determine which customers were exposed to SVB or Signature Bank. Procurement must determine which suppliers lost funding, and the AP team needs to reroute payments away from frozen accounts in trust.
- There is also a need to work with all of the finance team to validate new payment instructions, to avoid falling victim to cybercriminals. This is a good time for a payment security assessment.
- It might also be time to work with HR to see how employees could be exposed, including via payroll services. Even if they are through a solid bank counterparty, is there a plan B if they go down operationally due, for example, to a cyber incident?
- All the focus on uninsured deposits should also trigger treasury to review where it has cash and if it’s putting all idle cash to work securely in money funds or treasury bills earning 4% to 5% or more.
- Following board presentations on risk, bank counterparty risk dashboards may return—if they went away—and some new KPIs might be inserted, such as the percentage of investment portfolio classified as HTM, interest rate swaps relative to fixed income assets, and the diversification of the deposits base.
- If you don’t feel good about your own liquidity right now, do something about it by pre-funding, upsizing the revolver, and improving working capital efficiency—a big area demanding cross-organizational collaboration. Consider tapping the breaks on share repurchases.
A treasurer’s thanks. Following the first Silicon Valley Bank Crisis Community session, a NeuGroup member who is treasurer of a consumer retailer wrote, “As I finally sit down at the end of a very long week which was topped off by the SVB situation (which took up my entire day—I really could not afford the time), I wanted to offer thanks for everything the NeuGroup team does.
- “The ability to pull together a short notice, emergency meeting on SVB that so many members participated in is just another example of the tremendous value associated with being part of NeuGroup. Thank you!”
- NeuGroup in turn extends its thanks to you and every member committed to sharing knowledge with peers in need—a commitment grounded in trust that you’ll receive their help when you need it most.
- Trying times like these require finance professionals to support each other with even greater determination than when times are good. And NeuGroup’s mission is to enable and enrich that support, whenever and wherever possible.
