Executives are on high alert — especially CFOs — after an unforgettable week in the banking world. In the aftermath of the failures of Silicon Valley Bank (SVB) and Signature Bank, and with more banks being put on notice, much of the attention has been on depositors, investors, shareholders.
However, the employees of companies impacted by the banking failures have been seldom mentioned. As employees see their companies’ names on the lists of impacted organizations, it’s the duty of the executive team to maintain high communication and morale in a timely manner.
Anders Lillevik, founder and CEO of Focal Point and former chief procurement officer at Fannie Mae, shared his thoughts with CFO on how executives can communicate properly in times of crisis. As the Silicon Valley Bank situation unfolded, Lillevik needed to have swift communication with employees of the procurement software company about the process of changing banks.
“I was on a plane back from meeting with clients and prospects when the news about Silicon Valley Bank’s financial problems came to light,” said Lillevik. “SVB was our day-to-day bank, and most of our working capital was on deposit there; it was clear that we would be impacted by any disruption of SVB operations.”
After tracking the progress of SVB’s collapse through publicly available information, Lillevik needed to make a move. With help from his business manager, he was able to make quick decisions that ultimately preserved the financial integrity of the company.
“After doing a risk assessment, we decided to move our uninsured deposits to a safer financial institution, a large retail bank,” he said. “While conducting the transfers was not entirely straightforward, we were able to move the funds through a series of smaller wires.”
As soon as Lillevik knew his funds were safe, the day before SVB collapsed, he felt he needed to relay that information to both his investors and employees.
“When the balance sheet capital was safely on deposit with our other banking partner, I sent a message to investors, employees, and partners to inform them about our read on the situation and reasoning for moving the funds,” he said. “We also informed employees that while we were not anticipating any changes for them, regarding payroll or expense reimbursements, we would keep them informed.”
The fluent communication didn’t stop on the first feeling of financial safety. When it came to the logistics of payroll when SVB was taken over by the FDIC, Lillevik went right back to his employees to let them know what he and his team were doing to remedy any potential issues.
“When SVB collapsed the next day and we needed to make changes to how our payroll was deducted we, once again, let employees know that we were working with our new bank and payroll provider to change funding accounts for payroll,” he said. “We were not expecting disruption, but remained open to the possibility of unexpected issues.”
CFOs must be leaders in times of financial crisis. The enormous amount of pressure can be relinquished with communication within the C-suite or managerial team.
The CFO is likely to work with a more holistic view, looking at accounts receivable, accounts payable, and the impacts both have on treasury. — Anders Lillevik, Focal Point
According to Lillevik, a CFO needs to work with the chief procurement officer, or similar roles within the company, on what information to communicate to which parties, how to do so, and when. “If you are coming down hard on your suppliers to extend payment terms but not willing to do similar things with your customer base, this could become a PR nightmare,” he said. “Coordination [with procurement] is key.”
“The CFO is likely to work with a more holistic view, looking at accounts receivable, accounts payable, and the impacts both have on treasury,” Lillevik said. “Procurement can help with both the AP and treasury parts as they work with suppliers and manage expectations of suppliers needing to be paid. During the pandemic, many companies tried to unilaterally extend supplier payment terms, mid-contract. Those companies with good supplier relationships were more likely to achieve that.”
A cohesive and well-rounded CFO/CPO team can pay significant dividends for an organization in the best and worst of situations.
“As more and more is being asked of procurement, it is becoming increasingly important to have someone at the helm that can achieve procurement objectives,” Lillevik said. “When I started in procurement back in the 1990s, procurement was tasked to use the combined purchasing power of the company to save money.”
“The performance scorecard of the average procurement team has increased in complexity,” he continued. “Ensuring that all of these mandates are fulfilled in an expedited manner so as to not hold up the business is not for the faint of heart and should not be someone’s part-time job.”