Navigating the SVB Collapse: LS Associates on What To Do Next
The value of the On-Demand C-level Executive in the face of a rapidly changing economy
By Lily Lerner
The turmoil around the SVB Bank failure has left our clients and overall networks scrambling to ensure their key operating functions and internal controls have been established, and are functioning according to plan. Businesses in the life sciences take on massive risks as they push the boundaries of science, in the pursuit of novel treatments to improve the quality of life for their patients. In taking on such risk, executive teams, boards of directors, and investors seek to eliminate standard operating risks so they can remain focused on advancing their science and technology.
As we evaluate our clients’ potential missteps, LS Associates is strategically and tactically working to re-educate clients on how to accurately report company-wide operational policies, controls and risk assessments to their executives and board of directors. In this time of economic uncertainty, our on-demand Executives can partner with clients to ensure they are operating with reduced risk and operational transparency, but what does this look like and how can they help?
During a time when companies were frantically searching for support, our LS Associates, who always have the ability to come in on short notice, were able to adapt and insert themselves prior to and within hours of the bank run, to support clients who were looking for an immediate lifeline. Melody Vergara, one of LS Associates interim CFOs, continues to stress to our clients that “We are here to serve you. Your emergency is our emergency. We are here to help you feel supported and partner with you through this, or any critical time.” Like Melody, all of our Associates have more than 20 years of experience working with high growth, venture capital-backed life science companies. They have withstood a myriad of corporate crises, which has in turn, allowed them to establish stability and transparency within our clients. Joseph DiMartino, Chief Accounting Officer says, “At the most basic level, we, (LS Associate consultants), for impacted clients, were immediately focused on transferring funds out of SVB and refreshing letters of credit through alternative banks; this was imperative.” Joseph and our other consulting Associates were, and are actively leveraging the long-standing and deeply trusted relationships within our firm, and have immediately begun introducing our clients to alternative financial institutions. Following the SVB collapse, LS Associates on-demand executives have assured our clients that there was not a direct impact on their employees and key operations. Their seasoned support has provided our clients with an overarching sense of calm and confidence that their needs are being addressed and handled adequately and proficiently.
Several Associates are advising their clients to select 2-3 top-tier financial institutions and to leverage digital banks for day-to-day operating needs. Simultaneously, they are re-educating our clients on their previously installed cash liquidity and investment policies, while ensuring their Executive teams, investors, and Board of Directors are aligned on overall financial goals and objectives, including cash and treasury strategies and policies. Holly Purcell, one of our leading interim COO/CFOs, recounted how she quickly jumped in to help a client at the end of the week of March 6th, “Because of LS Associates’ wide-reaching network, I was able to connect my clients to one of the largest, well-established financial institutions and they had accounts opened Thursday evening. At a time when so many businesses were floundering and unable to find financial institutions who could assist them quickly after traditional banking hours, my clients were working through the “Know Your Customer” procedures, collecting documentation and taking action. They were positioned to initiate outbound wires Friday morning and were ahead of the pack.”
Right now, we are all discussing and questioning how to avoid repeating history, whether another bank failure is on the horizon, and how to best navigate the investment strategies and liquidity issues that businesses face today. The collective experience of LS Associates’ consulting executives and the network that we provide to our clients has been showcased throughout this recent crisis, and we hope to continue to provide support and relief to as many Life Science and MedTech clients as possible. LS Associates has over 100 On-Demand Associates available to help assess client needs and create stability and accountability within companies across the globe. As we look to the future, the Fed believes that the public can and will be notified about what exactly happened to SVB in an effort to assure us that this won’t happen again by early May. LS Associates consulting executives are preparing for the potential increase in regulation after these findings come out, though our hope is that SVB was a unique situation and that other banks are not at risk of the same or similar type of failure.