Matt Caiola
By Matt Caiola, Co-CEO of 5WPR, a leading PR agency.
As regulators, businesses and customers continue to investigate the causes that led to the failure of Silicon Valley Bank, the second-largest bank failure in U.S. history, one element of the story has become apparent among the rubble: what caused the bank to fail was caused by financial, structural and systemic issues, what caused it to fall so quickly and drive a ripple effect among regional banks across the country was compounded by communications and perception issues.
We’re no longer strangers to the ability that Twitter must drive a narrative and turn seemingly individual statements into not just trending hashtags, but national news cycles. This is not the first time that we’ve seen Twitter start a conversation that had business implications, but what we witnessed with SVB was a situation in which a movement on the platform had a broad impact on both Wall Street and Main Street.
To its credit, the banking industry has used digital tools to remove much of the friction in the customer experience over the past decade. Even 10 years ago, a depositor with an eye on the bank’s position who caught wind of the beginnings of equity stakeholders selling off, would have had to call the bank, speak to a representative who could have provided nuance to the story and assured the depositor, and in the event, they still wanted to move their money, conduct the complicated process of enacting a wire transfer. The systemic inefficiencies in this chain gave the bank time to both react operationally and from a communications standpoint to mitigate their exposure and the spiral.
That is not the case today, where a depositor can hear the beginnings of a story, check Twitter, and—understandably in a high-stakes situation—quickly move their money without fully verifying the facts by initiating a wire transfer from their app. What we saw here was a highly efficient product experience, met with a savvy consumer – without an equally efficient communications arm.
In the case of SVB, it became clear that in the race to limit the financial damage, bankers and executives were focused on solving the financial and operational fallout. Again, this is understandable given the situation, but it left them with a different level of exposure they had not anticipated, nor did they solve—communications and public perception.
What could SVB have done differently, and what can other financial institutions, tech companies and businesses overall learn from their fall?
There are many lessons that businesses and regulators will be taking from the SVB collapse in the coming days, weeks, and months. To continue to succeed in our highly connected world, the necessity of having a strong communications team as a core business strategy function must be one of them.
Risk management is the process of identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events.
A financial crisis is a situation in which the value of financial institutions or assets drops rapidly, leading to a loss of confidence and potential economic downturn.
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