House of cards: A closer look at the collapse of Silicon Valley Bank

By Rachel Ranosa-Joshi

scale, only exposed SVB to greater risk. Dodd-Frank mandates that banks that are deemed ‘too big to fail’ maintain sufficient capital and be subjected to yearly stress tests by the Federal Reserve.

Lack of leadership and oversight

Months before SVB collapsed, there had already been red flags emerging over its governance. For one, the bank had been lurching on for much of 2022 without a chief risk officer to guarantee management oversight. Laura Izurieta, who had previously held the position, had reportedly been inactive since April before departing the company in October last year. Only in January did the company onboard a new risk chief. The issue has become a point of contention in lawsuits against SVB.

From enjoying high liquidity to being crippled by account freezes almost overnight, employers with millions of dollars deposited in Silicon Valley Bank found themselves embroiled in the biggest financial crisis since 2008.

Once the favourite lender of start-ups and their venture capital backers, SVB had a market capitalisation of US$40bn and about $209bn in total assets, making it the 16th largest bank in the US. But the perfect storm of high interest rates and the overall downturn in the US tech sector left the bank reeling over an epic cash crunch in the weeks leading up to its collapse.

The tech lender had been investing in US treasury bonds to satisfy investor appetite for high returns. But these bonds were later divested in a $32bn fire sale after interest rates began to soar. When reports of the bank selling bonds at a $2.7bn loss circulated online, investors and depositors started pulling out.

“Clearly, the bank’s risk modelling didn’t anticipate the combination of interest rate and liquidity risk shocks it would face. Indeed, it seems apparent now that SVB’s liquidity risk management practices were deficient,” says Clifford Rossi of the Global Association of Risk Professionals.

SVB collapsed within 36 hours. Today, questions surrounding the tech lender’s massive failure have led many to re-examine where and how to keep their assets safe if even the most promising financial institutions – born out of the heydays of tech venture capital – are left vulnerable to a classic bank run.

Ambition vs regulation

SVB witnessed tremendous growth from 2019 to 2022. In fact, out of the initial public offerings in tech and health care which were backed by VCs in 2022, 44% were serviced by SVB. The failure of the tech lender, however, suggests how banks that are on an ambitious growth trajectory – and thus critical to the banking ecosystem – should be subjected to even stricter regulations to minimise their risk of a collapse.

However, the Trump era reversal of legislations such as Dodd-Frank, which aimed to prevent bank failures of this

And while the bank maintained a risk committee charter, the absence of a seasoned board member to monitor risks created a gap between what the leadership team set out to do and what it actually did to manage such risks.

Payroll issues triggered

With hundreds of accounts frozen, companies that banked with SVB were scrambling to process the paycheques of employees in the immediate aftermath of the collapse. Some transfers were halted midway. Meanwhile, start-ups that feared the worst were already preparing staff for eventual layoffs should the freeze end up depleting their cash reserves.

“Even companies who were not customers of Silicon Valley Bank may be impacted if their payroll provider utilised Silicon Valley Bank to process employee payroll,” advised the team from the US multinational law firm K&L Gates.

“Most states have more specific rules regarding frequency and timing of pay, as well as liability and penalties triggered by failure to comply with such regulations. Some of these requirements, such as California’s rules regarding timing of wage payment upon separation from employment and payment by check with insufficient funds, are subject to defences such as lack of willfulness and unintentional withholding of wages. Other statutes do not expressly contemplate such ‘unintentional’ defences, though certain advocates have lobbied governing bodies to extend leniency and waive penalties associated with Silicon Valley Bank’s collapse.”

House of cards

The perceived missteps of the leadership team at SVB prove the importance of robust governance policies that are enforced at every level of the organisation. In an era where ESG principles have come to dominate boardroom discussions, good governance is what advances the most successful organisations.

Without these regulatory frameworks and guardrails in place, even the most ambitious high-growth financial institutions can collapse instantly like a house of cards.

icks aJay Banga to succ EED Mal Pass at t HE orl D Bank

US president Joe Biden has picked the former president and CEO of MasterCard, Ajay Banga, to lead the World Bank and oversee a shake-up at the development organisation to shift its focus to the climate crisis. While the bank's governing body is only expected to decide the actual succession in May, the US, as the Washington-based organisation’s largest shareholder, has traditionally been allowed to nominate without challenging its preferred candidate for the post. Banga comes with decades of experience on Wall Street and has a track record of forging partnerships between governments, companies, and non-profits. He started his career in India, where he worked at Nestle and Citigroup before joining Mastercard, and currently serves as a vice chairman at General Atlantic.

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The Walt Disney Company has named Sonia Coleman as Senior Executive Vice President and Chief Human Resources Officer of the company, effective April 8. Coleman, who most recently has served as Senior Vice President, Human Resources for Disney Entertainment and ESPN, succeeded Paul Richardson, who is leaving the company after more than 15 years at Disney. Prior to that, Coleman served as Senior Vice President, Human Resources for Disney General Entertainment from 2017. She joined Disney in 2008, and was previously strategic HR leader at The Home Depot.

The BBC has appointed Uzair Qadeer as its Chief People Officer effective February 27, 2023. He reports to Leigh Tavaziva, Chief Operating Officer. Prior to this appointment, Qadeer was Chief People Officer at US healthcare provider Carbon Health, and before that he was the first Chief Diversity Officer at Alexion Pharmaceuticals. He has held numerous other leadership roles, including in Deloitte’s Human Capital Consulting practice where he advised clients across a range of industries, and at Bristol Myers Squibb Company where he worked in various roles in both the US and Italy.

Westlife Foodworld, the owner and operator of McDonald’s restaurants in West and South India, has ap- pointed Rohith Kumar as the Chief Human Resources Officer. He reports to Saurabh Kalra, Chief Operating Officer, and will work closely with the leadership team to make the organisation future-ready. Before joining Westlife Foodworld, Kumar headed Human Resources at Max Hypermarkets India (SPAR India) - Landmark Group. He has also worked with Aditya Birla Fashion & Retail, Lenskart Solutions, HyperCITY

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Vimal Kapur, President and Chief Operating Officer of Honeywell, has been named successor to Chief Executive Officer Darius Adamczyk, effective from June 1, 2023. He has been with Honeywell for over 30 years, previously serving as President and CEO of Honeywell Performance Materials and Technologies and before that, President and CEO of Honeywell Building Technologies. Before leading HBT, Kapur also held the role of President of Honeywell Process Solutions.

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Logistics solutions provider a PP oints k a M alika ka as Dir Ector of H r & Consumer electronics and home appliances company

Ecom Express has appointed Prashant Khullar as Chief Human Resources Officer. Based in Gurugram, Khullar will be serving more than 50,000 employees at Ecom Express together with a team of over 200 HR professionals. With more than two decades of experience, Khullar previously worked with Max Life Insurance Company Limited, Mahindra Holidays, The Indian Hotels Company Limited (IHCL) among others in various capacities. He was the Founder & CEO of “nerv2serv Learning Company.

Hisense has appointed Kamalika Deka as Director of HR & Admin. Deka comes with an experience of 16 years in the HR domain. Before Hisense, she had a stint with VisionSpring as Director of HR & Admin services along with Nicobar Design, Domino’s India, Titan Company, and Apollo hospitals enterprise. She was recently awarded T A PAI young HR leader 2022 and is also a TED X speaker.

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Dixon Technologies has appointed Arjun Singh as Chief Human Resources Officer. Singh, a former CEAT Tyres executive, comes with extensive global experience working in various roles including head of the HR function for sales, manufacturing, supply chain, and R&D organisations. Before joining Dixon Technologies, Singh worked with CEAT Tyres Limited as Vice President – Corporate Human Resources, for more than four years.

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One-tap checkout platform

Simpl has appointed Neha Dixit as the Vice President of its People Operations team. She is responsible for heading the organisation’s HR Business Partner function, providing leadership for people and culture priorities at Simpl, and strengthening the policy and process framework to enable fast-paced learning and leadership development within the organisation. Dixit has over a decade of diverse experience in running HR programmes across agile technology-driven companies such as Amazon and Myntra.

Manju Dhawan

Co-founder and Director at Ecom Express

By Mamta Sharma

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One false belief about diversity in the logistics

That it requires physical labour and is therefore predominately for the male population

And the reality?

Innovative technology, automation, and the e-commerce boom are creating more roles for women and entry into logistics has been made much easier

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The best way to promote diversity in a logistics company?

Foster an environment of respect while focusing on mutual trust and compatibility, and ensure that HR practices are favourable to meet the demands of the employees

4

Some ways you are encouraging diversity at Ecom?

Promoting more and more women at our large facilities, having female team members in last-mile delivery, establishing all-women delivery centres across the nation, implementing skill-building initiatives to increase the number of women in supervisory positions

Being the only woman on the founding team of Ecom Express, I bring a diverse viewpoint to the organisation, whether it is in terms of workforce, investments, or strategy

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How to make workplaces more welcoming to women?

We frequently conduct audits to help improve current facilities for female employees and have considerably invested in these facilities in order to empower and encourage more women employees across our many centres, like delivery centres, warehouses, hub, and processing centres

Challenges you've encountered?

Having the right mindset

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How to tackle that challenge?

Skill development workshops and training sessions to highlight the importance of gender diversity, also career acceleration programmes which offer specialised courses to women looking for career enhancement

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Advice for companies seeking to improve gender equality?

Be proactive in the aim to create a culture of equality which inspires and encourages women to rise to the top

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And advice for young women aspiring to leadership roles?

Believe in yourself when it comes to business decisions; learn how to leverage business nuances; increase your knowledge base, learn from experiences, aim to fill a variety of functional responsibilities as soon as you can in your profession; accept advice that is helpful and apply it