5 Lessons to Learn from Silicon Valley Bank’s Collapse
Silicon Valley Bank’s collapse was as swift as it was complete.
And that’s what’s so troubling.
It was the second biggest bank failure since Washington Mutual’s in 2008.
I distinctly remember standing in line at my local WaMu to pull out what (little) funds we had at that time. In full startup mode, cash wasn’t plentiful.
SVB isn’t WaMu, but its rapid failure showed that today’s connected world accelerates mistakes.
Here are some PR and communications lessons to learn from their immolation.
One communications misstep can be disastrous
While the seeds of discontent were already planted earlier, and hedge funds were shorting SVB due to their vulnerability in having assets in lower yield treasury products, the inflection points seemed to be when SVB officially announced that it was planning to raise over $2 billion to “strengthen (its) financial position” after suffering losses.
As the hosts on CNBC said a few times regarding that news, if you have to come out and deny that you’re in trouble, you’re already in trouble.
That news spooked both customers (depositors) and investors alike. The bank run accelerated to the point of no return.
A little wargaming might have helped determine that both the course of action and how it was communicated might have a counter effect to its intended goal.
People will read between the lines
While the press release was meant to reassure stakeholders, everyone read between the lines and inserted their own assumptions and fears.
“Why would they need to raise more money if they were doing ok?”
Try and predict the worst fears of your customers, what truly keeps them up at night.
Then communicate and reassure in concrete terms how their fears are unfounded, ideally using data and statistics.
Speed is accelerating
In today’s instant communications world, the speed that crises unfold is accelerating at breakneck pace.
From Wednesday evening when the press release was issued about the capital raise, to Friday when the FDIC took it over due to its complete collapse, was a period of less than 48 hours.
The pace of news was dizzying, and literally hour by hour.
Even the most nimble comms team would struggle to manage such lightspeed developments.
This makes having a crisis comms playbook even more critical than ever. Being able to have protocols to put in place when a sudden unexpected problem arises will help the executive team manage (and hopefully survive) the crisis.
Post-crisis management is just as important
A crisis doesn’t have to be the death knell of a company.
SVB was a confluence of many variables, some macroeconomic, some unique to their business model, and some bad risk management.
But many companies large and small face PR disasters and come out the other end not too much worse for the wear.
One of my favorite examples is from 40 years ago. The Tylenol murders of 1982 could have been devastating to a popular over the counter drug brand. But the manufacturer of Tylenol, Johnson & Johnson, enacted multiple proactive measures to prevent tampering from ever happening again, and aggressively communicated their new measures.
All told, they poured in $100 million in investment for new features such as tamper-proof packaging with foil seals and other features. Because of their post-crisis management, their sales rebounded within a year. Proof that how you respond to crisis is just as important as preventing one.
Twitter makes news now, not only reports it
One of the catalysts for the run on SVB was the tweets reporting on VCs warning customers to get their money out, as well as tweets reporting on Peter Thiel’s Founders Fund recommending their clients to get out as well.
And because SVB’s high concentration of tech clients, and its key position as it relates to the startup ecosystem and venture capitalists, many of the stakeholders or influencers live and breathe on Twitter.
The tweets took on a life of their own and undoubtedly accelerated SVB’s demise in a way that might have been unthinkable until recently.
Social media doesn’t just report the news, it can make the news.
Be extra cautious what you put out. As they say, the Internet is forever.