Today we're talking about the recent meltdown at Silicon Valley Bank and the importance of crisis communications. The go-to bank for tech startups in the US became unhinged this week, creating a spiraling set of crisis issues to address. While rumors of the meltdown swirled, the bank's high-powered customers and investors were kept in the dark, in an era where 280 characters and bring on the downfall or salvation of a brand.
Silicon Valley Bank (SVB) recently experienced a series of major crisis starting with a capital crisis that resulted in many of its clients being unable to access their accounts, payroll to come to a standstill, a sudden bank run, and ultimately a takeover by federal regulators. The incident caused widespread panic and frustration among SVB's customers, many of whom depend on the bank for critical business operations. It was the largest failure of a US bank since Washington Mutual in 2008.
Quick back story: SVB was founded in 1983 and has built a reputation for specializing in banking for tech startups. The bank is known for providing financing to almost half of US venture-backed tech and health care companies. Up until recently, it was among the top 20 US commerical banks and claimed $209 billion in total assets at the end of last year, according to the FDIC.
Now, SVB is known as one of the top banks for technology startups and venture capitalists. So, when news of the meltdown broke, it was no surprise that it made headlines across the tech industry. The timeline started with the Federal Reserve raising interest rates due to inflation, as the Fed moved, the higher borrowing costs impacted the momentum of the tech stocks that had benefited SVB in the past. The same higher interest rates lowered the value of long-term bonds SVB had. Then came the drying up of venture capital, leading to startups drawing down funds at SVB. The bank, sitting on unrealized losses in bonds, then got hit by increasing customer withdrawals. Yikes.
But here's the thing, this isn't just a story about a bank having a bad day. This is also a story about how a company's response to a crisis can make or break its reputation.
Let's take a closer look at what happened. On Wednesday, March 8, SVB distributed communications that it sold a large volume of securities at a loss, and that it had a plan to shore up its balance sheet. Panic ensued, and those venture capital firms allegedly advised the companies they were invested in to withdraw their money from SVB. This triggered SVB's stock to take a dive Thursday morning, and then started to bring down other bank shares as fear of 2007 set in.
By Friday morning, the bank had issued a statement on its website acknowledging the problem and assuring clients that it was working to resolve it. But here's where things got interesting: while the bank's website was updated regularly with status updates, its social media accounts remained silent.
As we've seen time and time again, social media is often the first place people turn for information during a crisis. So, it was surprising that SVB didn't use its social channels to communicate with its clients and the public more directly. As a result, rumors and speculation began to circulate, and frustrated customers took to Twitter to express their anger and anxiety.
It wasn't until late Friday night that SVB finally issued a tweet acknowledging the issue and promising to keep clients informed. But by then, the damage had been done. SVB had lost the opportunity to proactively communicate with its clients and had allowed the narrative to be hijacked by unhappy customers.
So, what can we learn from this? Well, first and foremost, it's critical to have a crisis communications plan in place. This means not only having a strategy for how to communicate with clients and the public during a crisis, but also having a plan for how to address the underlying issue.
In a crisis, clear, informative, and quick communications is of utmost importance. Companies and executives tend to rightfully focus on the pending operational needs. They need good partners to lean on with experienced and agile communications expertise who understand their businesses, the needs and concerns of their stakeholders, and can help them navigate real time communications in a highly charged internal and external moment.
It's also important to be proactive in your communications. Don't wait for clients to come to you with questions or complaints - reach out to them directly and keep them updated throughout the crisis. And remember, social media can be a powerful tool for communicating with your audience, so make sure to leverage it effectively.
Use the power of your relationships to help share key messages across your industry. If you have built a solid business reputation and have good relationships with your partners and stakeholders, the dialogue should be transparent and two way. They can also be emissaries for your brand.
Finally, it's important to take responsibility for the issue and be transparent about what happened and what you're doing to fix it. In SVB's case, some customers complained that the bank had initially downplayed the severity of the issue, which only added to their frustration.
So, there you have it - a cautionary tale of how a lack of preparedness and proactive communication can lead to a crisis spiraling out of control. The main goal of a crisis communications expert is to make sure that the reputation of the company is protected. Crisis communications is an important part of your business planning, and crisis specialists should be well vetted and battle tested, so they can respond with an appropriate communications strategy.