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How the second-biggest bank failure in U.S. history can learn from supply chain woes

Financial institutions throughout the world were shaken in early March by the collapse of the Silicon Valley Bank (SVB). Founded over a poker game in the 1980s, SVB grew into 16th largest bank in the U.S. and took on the role as a go-to lender for tech startups that were considered too risky for larger and more traditional banks. For decades, SVB provided financial services to some of the country’s most innovative tech venture companies, life-science companies, and insurance companies, to mention a few of the over 2,500 enterprises listed as investing in SVB. At the time of its collapse, the bank was said to do business with nearly half of all U.S. tech startups backed by venture capitalists.

SVB’s abrupt collapse is a reminder of how risk is a constant companion to innovation and competition. Moreover, it shows how a single institution can create a domino effect that threatens jobs, retirements, and the financial security of thousands of small businesses scattered throughout the country.

In that sense, the impact of SVB’s financial collapse mirrors some of the dynamics seen in the supply chain implosion that took place during the Covid-19 pandemic. Trust is the building block for both the supply chain and banking businesses. Covid-19 supply chain disruptions rippled through multiple sectors, eroding public trust in reliability and resilience. Empty grocery store shelves and daily price fluctuations shocked consumers, led to panic buying, and helped fuel inflation. Longer term consequences stemming from the supply chain fiasco seen in 2020 and 2021 include entire shifts in global production, near shoring, and reshoring.

Every bank is a supplier, a highly strategic one, and the recent failure of SVB has shown organizations just how important strategic management is. Supply chain leaders must attend to basic practices – savvy handling of risk, relationships, and performance – whether the organization in question is a bank as ambitious as SVB, or as modest as the mom and pop maker of cardboard to-go boxes.

The re-strengthening of the supply chain that has taken place over the last twelve months offers hope to the banking industry in the wake of SVB’s collapse. At least in the case of the much-battered global supply chain, bolstering public trust has been essential to restoring faith in the system as a whole. The banking industry would be wise to take steps to do the same.

Public trust is the world’s most valuable currency, one that can ensure that any company or sector rebounds from an economic downturn. By working to regain public trust, the banking industry can ensure that the effects of SVB’s collapse are temporary and minimized.

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