- Myriad factors contributed to SVB’s tragic story, but it was ultimately a failure of effective communication that led to the bank’s collapse.
- Analysing the media debate, we found that communicating to the layman is just as important as investor relations, while CEO comms is a central part of crisis management.
- We also found that social media monitoring should inform strategy, while the tech community has a major perception problem.
By this point, almost anyone with internet access has some inkling of the Silicon Valley Bank (SVB) collapse, which sent shockwaves across the global financial system. We have witnessed ripple effects in recent days culminating in the collapse of additional banking giants including Credit Suisse and Signature Bank.
It’s hardly a debate that SVB made significant financial missteps dating back several years. However, it was the firm’s failure to effectively communicate information and offer positive sentiment to its stakeholders in recent weeks that put the nail in the coffin.
To see what we can learn from this PR crisis, we analysed 1,237 English-language articles about SVB‘s collapse published in top-tier outlets in the last month.
1. A lack of effective media messaging can cost you everything
In addition to financial missteps behind the scenes, when the announcement of SVB’s securities sale and cumulative loss surfaced there was a failure in communication at all levels. SVB acknowledged its multi-billion-dollar loss in its investor letter, but did not acknowledge the big picture, nor did it put matters into perspective, namely the fact that the bank was worth hundreds of billions of dollars. Investors would feel more comfortable if reassured that a $1.8 billion quarterly loss would not repeat itself in future quarters or drastically impact the longevity of investments.
The failure of Silicon Valley Bank was ultimately caused by a run on the bank. The company was not, at least until clients started rushing for the exits, insolvent or even close to insolvent. But banking is an enterprise that relies as much on confidence as on cash — and if that runs out, the game is over.
This is why Loss of consumer confidence was the main reason for SVB‘s failure, according to most media publications in our research sample:
The company did not proactively address the public to the necessary degree beyond its paid media strategy. Its top brass did not establish a PR crisis management plan to align with its relatively younger Silicon Valley-inspired client base, addressing concerns on an individual and public level from the moment the announcement went live. Instilling confidence through well-prepared messaging and a cohesive crisis plan that incorporates all marketing channels, would surely have garnered a kinder and better public understanding of SVB.
Furthermore, one company’s lack of a PR crisis management plan resulted in a crisis across the whole sector. Customers of another more business-friendly bank – Signature Bank – were spooked by the SVB news and withdrew more than $10 billion in deposits, which quickly led to the third-largest bank failure in U.S. history. This made Signature Bank the second most influential organisation in the debate in terms of media impact.
We determine an organisation’s media impact in the context of a topic by looking at its media influence score calculated in terms of coverage by high-profile media outlets, topic relevancy score measuring its contextual relevance, and media visibility as measured by the number of mentions.
Meanwhile, the subsequent demise of Credit Suisse made the Swiss banking giant the third most influential organisation in the debate as its government-backed, cut-price deal with UBS appeared to have dealt a blow to Switzerland’s reputation for stability.
2. CEO comms is a central part of crisis management
Silicon Valley Bank also showed a massive oversight in communication from senior leadership. CEO Greg Becker’s initial message to investors placed the onus of distrust on the bank’s customers, with the words “We have been long-term supporters of you — the last thing we need you to do is panic.”
Becker’s statements were widely quoted by the media, making him the most influential spokesperson in the debate after the US Treasury Secretary and the Federal Reserve Chairman:
While he may have been well-intentioned, Becker’s message was understandably off-putting. Becker also made a crucial mistake by refusing to take questions on the investor call, at a time when he could have reassured his audience. Further, he appeared to overestimate the goodwill he believed customers owed the bank when he said that the bank had been a “longtime supporter of you, the venture capital community companies, and so the last thing we need you to do is panic.”
So instead of water, the SVB CEO reached for gasoline by conducting a conference call which even he called ‘strange,’ according to media accounts. During his call, he urged listeners to ‘just stay calm, because that’s what’s important.’
Lastly, Becker was often a guest on top-tier broadcast segments on networks like CNBC and should have sought out similar opportunities when the announcement emerged, to justify the company’s decision-making. Investors were given no reason to “stay calm.”
3. Communicating to the layman is just as important as investor relations
SVB‘s press release was truly ineffective – some commentators called it a jargon-filled monstrosity of a press release and the worst press release of all time. It assumed the reader is well-versed in the financial markets and offers no context for why the company is taking these actions.
Additionally, the announcement mentions that SVB sold approximately $21 billion of securities, resulting in an after-tax loss of about $1.8 billion in the first quarter of 2023. With some thought, this release could have laid the foundation for a message that would have demonstrated stability and evoked confidence.
It’s common for IR announcements to be dry and full of regulatory language. However, for something as critical as their announcement, SVB should have considered what implications the press release might have on depositors.
This was their chance to set the context of the news and assuage concerns surrounding public confidence in the firm. SVB could have bolstered the information with third-party validation through a quote from General Atlantic expressing their confidence in the firm. A quote from the SVB CEO could have provided further context and put a human voice to the story.
Press releases are the first opportunity for companies to ensure people think what they want them to think. In the PR industry, this is called “messaging pull-through.” The release sets the information’s tone and foundation and how to frame it. Of course, people will think whatever they want to, but at least the release has set a foundation that is beneficial to the company.
4. Social media monitoring should inform strategy
While we can draw parallels between this organisational collapse and the 2008 financial crisis, this situation was vastly different in the context of the digital age. This was the first social-media-driven bank run, fueled by venture capitalists and tech startups who flooded social media channels and online threads.
The Twitter storm that ensued secured 3.5 million views and 380 retweets and quoted tweets. SVB failed to act in response to the negative Twitter sentiment surrounding the company, as evidenced by the keywords in discussion:
By all indications, SVB was “radio silent” in its social media engagement. In response to this blunder, we have witnessed other top national and regional banks take extensive measures to prevent this from happening again. For example, First Republic Bank posted a multitude of tweets exhibiting a commitment to valued customers.
While a better social media strategy might not have gotten SVB out of the woods, consistent communication via social media can and should play a significant role in PR crisis management, no matter the industry.
Had SVB been monitoring social media more closely, it might have deduced that VCs would likely start paying close attention to the developments. With this in mind, they would have taken extra steps to release their statements more strategically. Crisis communications extend to all marketing channels, especially social media, and SVB did not implement a functional crisis communications plan to ease investors’ complaints.
5. Tech has a major perception problem
Tech had a major slowdown in the late 1980s as PC demand paused as the Windows world transitioned from DOS to Windows. Then, it had another downturn during the Dot-Com boom and crash in 2001-2002. Thanks to a significant economic downturn in 2008 because of the housing crisis, tech demand declined again, and layoffs were rampant.
However, the failure of Silicon Valley Bank‘s impact on tech’s overall image has tarnished the public’s view of tech worldwide. And its broad impact on banking and our world’s economic concerns will hang over tech well into the future.
Much has been written about Silicon Valley Bank’s role in the tech industry. It was the key bank where tech-focused venture capitalists placed their startup bets and finances that powered their investments. The failure of this bank at the heart of Silicon Valley’s growth will impact people’s view of Silicon Valley.
This will be even more true if, as some have suggested, this canary in the coal mine has a more significant impact on minor bank failures in the future and negatively affects the economy.
Scientists and engineers will continue driving innovation and delivering new engine technology growth in the future. However, the Silicon Valley Bank’s demise will negatively influence the view on tech industry even when tech recovers.