Businesses with strong balance sheets and sticky liquidity will always go the distance.
That’s why, after the collapse of Silicon Valley Bank (SVB), treasury management is shooting up the priority list for CFOs, said Kiran Hebbar, CFO at at identity decisioning platform Alloy, during a conversation for “PYMNTS CFO Series: What’s Different?”
“Treasury used to be something public businesses or those approaching going public worried about,” Hebbar said, “but all of a sudden it’s changed, and now every CFO in my peer group is thinking about it. Earlier it was just market risk, what’s new is bank risk.”
Hebbar added that in terms of investment diversification, yields are not nearly as important as pure capital preservation. “[Investors] don’t give us money for us to optimize the yields … but if we lose capital, that’s a big deal,” he said. “In a liquidity crisis, there needs to be access to capital.”
Marketplace and macroclimate ebbs and flows are cyclical, but strong fundamentals around liquidity management and financial discipline are universal.
Read more: Know-Your-Business Focus Aligns Banks and FinTechs in 2023
In challenging macro environments, process improvements are about having the right insights and protocols in place to succeed in the face of the unexpected, and Hebbar said that the collapse of SVB has accelerated the already-growing responsibilities of the CFO as it relates to taking a holistic and strategic vantagepoint of the business.
“In terms of communicating to employees and giving them a view on what’s happening in the market and translating it to how it impacts us, it has really elevated the role of the CFO to be a true partner to the CEO,” he said.
Underpinning this, Hebbar added, is the increasing importance for the finance office to “be very operationally savvy” with regards to every detail of the business, not just around finance but marketing, sales, customer success and other verticals.
“It’s all about sustainable growth,” Hebbar said, emphasizing that with the previous era of growth at all costs coming to a close, it is now mission-critical for CFOs to have a granular grasp of the operational foundations of their business so that they can then translate those discrete elements into an understanding of “how are product and engineering impacting revenues, how does pricing impact potential churn, really understanding everything in order to make sharp operating decisions.”
It has also stepped up the need for the CFO to communicate to the rest of the company, Hebbar added.
Read more: After SVB, Bank Runs and the Capitol Hill Fireworks … Now What?
As it relates to best practices in managing for bank risk, Hebbar emphasized that, “it’s become sophisticated all of a sudden … the world has changed.”
“Right now, we have about six, seven or eight different accounts and banks – and it has increased the complexity [tenfold]. I’m training one of my staff members now to manage this and make sure we always know where cash is parked and how to access it, what the roadblocks like wire approvals, how many approvals are needed, logins and passwords, so that in a crisis none of these things get in the way,” Hebbar said. “But there are a lot of considerations around diversification, preexisting relationships, debt covenants and investment goals.”
He underscores the need for CFOs to keep enough easily available cash on hand to fund operations for at least a two- to three-month runway so that things like payroll aren’t disrupted.
And it’s not just internal operations that CFOs need to be aware of — Hebbar said that it is just as critical to keep a finger on the pulse of a company’s customers.
As PYMNTS reported earlier, the recent banking collapses have gifted cybercriminals a perfect cocktail of urgency, uncertainty and money movement, creating an irresistible, golden opportunity for scammers and fraudsters to exploit.
Hebbar said that Alloy noticed the same and made sure that its customers who are banks had the right set of tools to onboard “good” accounts and ensure that no room existed for fraudsters to get ahead.
“Making sure that our customers’ businesses were, and are, not disrupted internally [was crucial],” he said, adding that the SVB collapse also spurred a lot of discussions around the overall macro environment and how to best work with customers as partners.
“If somebody is challenged based on economic conditions, we want to work with them so they remember Alloy as someone who stood by them during these temporary economic challenges,” Hebbar said, adding that while relationships of that nature used to be solely the responsibility of the customer success team, it is increasingly a part of the broader finance team’s role to work closely with them on things like designing proactive payment plans and helping forecast the impact of relationship flexibility on revenue.
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