The biggest U.S. bank failure since 2008 has emphasized the fundamental importance of best practices.
That’s what a dozen top finance leaders across industries told PYMNTS during a series of interviews that took place in the weeks following the aftermath of the Silicon Valley Bank (SVB)-led banking failures in March.
While the immediate market impact is starting to ease up, the collapses have highlighted the need for greater and more frequent communication led by chief financial officers around liquidity levels and cash availability at the board, management and even employee levels. They have also brought bank risk frameworks, working capital management strategies, and relationship redundancy tactics into clearer focus.
Carlos Sanchez-Arruti, CFO at payments solution provider Mangopay, said that March’s mini banking crisis has “validated the discipline that CFOs need to have around cash management and treasury,” serving as a “wake-up call” for many companies and CFOs to go back to basics.
He added the new macroenvironment has made it essential for finance leaders to pivot from a “sexier focus on just growth,” toward one that relies upon concrete fundamentals of controllership and ensuring long-term visibility over working capital and profitability.
“It’s your ability to invest in growth and be able to cultivate your technology, it supports nearly all points of strategic differentiation,” Dillon told PYMNTS, adding that March’s bank industry turmoil has “called into more stark focus the operational aspects of the business and how important it is to avoid any single point of failure, even if for a day.”
Dillon emphasized that finance leaders can drive alignment and accelerate growth in even the most challenging times by being clear about strategic priorities and business landscape assumptions, socializing them with the rest of management, and then stress-testing those scenarios across different priorities and with different tactics.
“It’s actually a time when the work of the CFO is really gratifying,” he said. “…Having a strong finance team [in today’s environment] can make a huge impact on the organization.”
“Cash is king, and understanding the company’s cash flow, burn rate, and making sure you have the appropriate financial capacity and security is bar none,” Pergola said.
Neese emphasized that “where you’re spending money, that’s the strategy,” which is why taking a proactive approach to resource allocation is mission-critical. He said that by working in step with other departmental executives, CFOs can “define a fantastic strategy for the future.”
“[A]t the end of the day, CFOs can’t forget their fiduciary responsibilities and core principles: Never spend a dollar if you don’t need to,” he added.
March’s events brought a new factor into focus for finance leaders: bank risk. The current macroenvironment has made it essential for finance leaders to be more strategic and proactive in managing their banking relationships and cash diversification strategies.
“Coming out of that activity, we looked at updating our treasury policy to de-risk the types of institutions [we bank with] and diversify the vehicles we are investing in, as well as ensuring that we continue to have optionality between multiple, low-risk banking partners,” Nathaniel Katz, CFO at eCommerce software provider Rokt, told PYMNTS.
The dialogue should be ongoing between the CFO and the business economics, Held added.
“In terms of communicating to employees and giving them a view on what’s happening in the market and translating it to how it impacts us, it has really elevated the role of the CFO to be a true partner to the CEO,” Kiran Hebbar, CFO at identity decisioning platform Alloy, said to PYMNTS.
Sezzle used SVB for the organization’s operating account up until the day the bank failed, and Hartje highlighted that the lender’s collapse “changed the conversation” around bank risk for her organization.
“Whereas previously growth and subsequent scale were important, now we are thinking about things like unit economics and improving margins,” Franco said. “Growth is still a key metric, but the thought now is let’s do it in a healthy and responsible, even creative, way.”
He added that there’s been a “descoping” of certain priorities and investments as part of a renewed focus on this flavor of healthy growth.
For some CFOs, the most pressing concern is more macroclimate than March’s events.
“Inflationary conditions are still real and still relevant, and companies need to react to that,” James Ritter, CFO at ABBYY, told PYMNTS. “I think [dealing with inflation] is still the highest priority for a lot of financial executives at their companies.”
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