As the saying goes, failing to prepare is preparing to fail.
Nowhere is Benjamin Franklin’s aphorism truer than in the finance department.
Ongoing geopolitical and macroeconomic uncertainty have underscored the importance of strong fundamentals for chief financial officers, who have witnessed enough black swan events over the past few years to be forgiven for thinking white ones no longer exist.
But Uri Zelmanovich, CFO at open banking FinTech Trustly, told PYMNTS that throughout his career, he’s learned one thing: The only certainty is uncertainty, and certainty favors the prepared.
“I’ve been around for quite some time, and this is not the first kind of crisis I’ve been through,” he said, emphasizing that “building core foundational and best practice finance capabilities can ensure that [organizations] are able to react quickly and navigate effectively toward the best possible outcome, no matter the circumstances.”
March’s mini banking crisis, the aftereffects of which are still being felt, has increasingly brought corporate risk frameworks and working capital management strategies into stronger focus for finance teams.
“The new normal is clearly treasury and cash flow management, which are surfacing to the foreground of the CFO priority list — and relationship diversification has become a key role in managing risk,” Zelmanovich said.
He noted that diversification does “come with a cost,” and he said he hopes to see an “accelerated utilization of innovative products” that make it easier to insure deposits regardless of what transpires with the Federal Deposit Insurance Corporation (FDIC) as a result of the bank failures.
The contemporary macroenvironment and its swirling headwinds have made it essential for finance leaders to pivot from pure-play growth strategies to the concrete fundamentals of controllership visibility and ensuring healthy, sustainable profitability.
“There are creative approaches to managing cash risk, and ensuring safety of funds while understanding cash flow needs is a part of the new normal,” Zelmanovich said, adding that “as a finance leader, recent events have emphasized the need for enterprise-wide agility to react to crises.”
He explained that “part of any good crisis management” is doing a rapid situational assessment, having a proactive communication plan, and preparing as much as possible by cultivating strong finance and risk management capabilities.
The common thread among those strategies? Consistently maintaining operational transparency and visibility over key business processes and performance indicators.
“Every senior finance professional that successfully navigated the pandemic now realizes the importance of agility to the ability to react quickly,” Zelmanovich said.
Whereas a few years back it may have been “OK” to understand financial performance on a monthly or even quarterly basis, he said, the pandemic forced the need for “real-time visibility into your business drivers, coupled with enterprise capabilities to make quick decisions.”
Particularly as organizations across sectors look to reprioritize profitability over growth, Zelmanovich said there’s a greater focus on “building capabilities within finance and accounting to increase automation, enterprise connectivity, and empower real-time decision making.”
He explained that having well-organized and current financial forecasts with clear prioritizations of expense bases and knowing which levers to pull to course correct is “absolutely essential.”
While large U.S. financial institutions holding more than $250 billion in deposits are subject to stringent federal- and state-level regulatory oversight, about half of U.S. customer bank deposits reside in regional lenders that are managed with a lighter regulatory touch.
Zelmanovich said he believes that March’s collapses could have been avoided with more sensible regulatory oversight, noting that “we’ve certainly learned systemic bank risk goes beyond the top eight banks … these things don’t happen overnight and could have likely been detected earlier.”
He explained that “rebuilding trust in our regional banking ecosystem” is very important because regional and community banks remain vital to a healthy and competitive macro landscape that ultimately benefits both businesses and consumers.
Many businesses have reacted to the rapid collapses of Silicon Valley Bank (SVB), Signature and First Republic by shifting their money to some of the largest U.S. banks, leaving smaller banks in the lurch.
“Absent any new regulations or an overhaul of the FDIC backstop, there’s a risk of greater concentration of assets and market power with the largest banks, which could increase their bargaining power in setting the terms and dictating the future of open banking and open finance regulation, which is currently underway,” Zelmanovich said.
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