Procurement’s Perfect Storm: Silicon Valley Bank

by 4C Insights | Mar 17, 2023

This last decade has been a playground for the global technology ecosystem to flourish and enable positive disruption across every industry. The backbone and a key enabler of this has been Silicon Valley Bank (SVB), with whom many of the world’s largest VC investors bank with.

So how on earth did this investor safe asylum crumble in two weeks?

Well in short, higher interest rates and impacts of inflation eroded the value of long-term bonds, mixed in with the drying up of venture capital where start-ups and other Clients started to draw down on funds held by SVB, it all just escalated very quickly. Thus, resulting in the demise of SVB.

Panic started, the government stepped in, and the Bank of England understood the importance of ensuring assets of these growing start-ups were not perished within seconds. HSBC swooped in like a heroic vulture knowing full well that they had made the purchase of the year, by acquiring UK arm of the late great Silicon Valley Bank… for £1.

Why is this so important?

Innovation (along with sustainability) is the buzzword of the business world. Everyone wants to do things differently, be more effective and crash through barriers of entry. They recognise that this can only be achieved through innovation. Working with start-ups, fintech’s and the like – and relying on their slick, agile expertise to get them there.

But it’s not just for big companies depending on the idea generation & delivery of start-ups, it’s the economy and people behind it. It’s investing in entrepreneurs, enticing them to set up shop in the UK so that we can be seen as a world leader in disruptive tech. Businesses benefit, the people benefit and so does the wider economy.

Well, what’s Procurement’s role?

As always, Procurement has a big part to play. Especially in stabilising relationships, ensuring continuity of services and just being an all-round great department. Trying hard to not be too biased here.

Below area few points on how procurement can help to effectively govern issues and mitigate risks that sit outside of our control, although I’m sure we’ll find some stakeholders that will still try and scapegoat procurement… we see you!

For your business:

Map. It. Out. – work with your Finance / AP teams to identify who your suppliers bank with.
Following this, begin to complete risk profiling and identify suppliers that provide critical services to your business.
Have conversations with your stakeholders around best- and worst-case scenarios. Can you effectively and efficiently pivot to another supplier? How integrated is the supplier? Can you support the supplier in other ways?
Always keep an eye out. HSBC came and saved the day, but it might not always be the case. And we’ve seen somewhat of a ripple effect as things with Credit Suisse have started to unfold.

Working with your Suppliers:

As always show compassion – Be mindful, show support to your suppliers and listen. More likely than not they’ll be telling you how brilliantly they averted their own internal crisis!
Be open with the internal risks you’ve identified and ask for their insights.
Ask for a copy of their Business Continuity Policy. Business continuity isn’t just for floods and power shortages, its usually a great way to see how the supplier will deal with a range of risks.
Continue to work closely with the suppliers. As we know a great asset to any relationship is effective Supply Relationship Management practices. Be in the know rather than hearing about it in the 11th hour.

Time and again we’re seeing the positive impact of Procurement. We’re an industry that supports and mitigates risks across the business and by having the knowledge, skill set and tools to equip and enable teams to become resilient and be able to do the hardest thing, pivot.

Whilst unfortunately many of us don’t have a crystal ball giving us a heads up to the bumpy road ahead, our resilience, proactivity and insights will continue to be the determining factor of our place within any business.