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Five Questions Your Board Will Ask You in the Wake of Recent Bank Failures

By Michael Horney | March 16, 2023 | 0 Comments

Financial Services

Authored by: Wellington Holbrook, Senior Director Analyst and former CEO of connectFirst Credit Union and Michael Horney, Executive Advisor

No matter your organization’s size, brand, or level of exposure to the current banking crisis, it’s a difficult time to be a bank CEO. Questions and concerns are likely floodings in from the board of directors, executive partners, employees, customers, the media, and regulators. While it’s possible to delegate certain stakeholder communications, the CEO is solely responsible for liaising with the board. During a crisis, that means being prepared for the near-constant questions and conversations that will arise. 

Here are five key questions–and reminders–that you should prioritize:

Five Questions Board Executives Will or Should Ask Bank CEOs

What is our level of exposure to risk?

Every standard transaction and/or strategic choice at the balance sheet level could be scrutinized or misconstrued. Connect with the CFO and an ad-hoc executive committee to discuss vulnerabilities. This could include a mismatching of long- and short-term assets, but it could also include counterparty risk. Are your customers concentrated in a specific (and struggling) market? Are you exposed to the impact of Silicon Valley Bank? CEOs should be able to answer these questions to build trust with their board members.

Is there any unusual customer activity occurring?

When running a bank, it isn’t uncommon for “unusual” things to happen. But in times of crisis, taking note of any unusual or unexpected customer behavior (e.g., transaction levels, cash outflows, etc.) is especially important. Work with the CIO to ensure there is visibility into activity levels in any particular channel and seek regular information on things like activity levels on digital channels and inflows or outflows of payments. This is also the time to be vigilant against cyber-security threats and ensure your CIO is on heightened alert. Let your board know of the extra vigilance and steps that might be taken in this regard.

What are customers and social media platforms saying about us?

Create a strategy to get real-time feedback on social media sentiment, and customer and stakeholder sentiment through normal feedback channels. Ask the CMO to develop a sentiment dashboard that measures positive vs. negative sentiment and create an index that is tracked hourly or that alerts when a concentration of negative sentiment is identified. Use this information to inform board members regularly to validate (or not) what they might be hearing in their own networks. Finally, develop thresholds where public relations activities might be adjusted if sentiment appears to be souring.

If exposed to a bank run, what is our next course of action?

If a financial institution is ever faced with a crisis of this nature, it will be time to rely on processes that you probably have already in place. To be ready for the worst, ensure your emergency response team is aware of their roles and responsibilities. If possible, test real-world scenarios that could impact your business. For example, if the mobile app goes down as a result of unusually high transaction volumes, how quickly can IT troubleshoot the issue? Is the organization comfortable operating within the context of its business continuity plan? Are there procedures that can be implemented to reduce cash outflows? Can call center volumes be managed if volumes increase unexpectedly? Proactively inform the board of preparations for worst-case scenarios and any adjustments to approaches you may consider in the event of challenges. 

Does this crisis provide a growth opportunity for us?

Now is a time to build the confidence of customers and emerge from the current threats facing the banking industry as a trusted and well-managed financial institution. Not to mention, the displacement of customers impacted by the recent bank failures creates real growth opportunities for other financial institutions to win new business. This may also mean expanding into new customer segments or acquiring new capabilities from displaced talent. In any event, every crisis presents opportunities and it is a good time to present a plan to the board that outlines some opportunities that may be available to your organization.

Behavioral Best Practices to Get You Through the Crisis

Lastly, this is a time when true leaders stand out and make a statement, not just with the board, but also with customers, peers, and employees. Keep in mind these behaviors during this crisis:

  • Set up a daily huddle: While you might need a formal in-person meeting and/or daily report on updates, setting up a daily huddle to make yourself available to questions and concerns will demonstrate your adaptability as a leader.
  • Scrutinize your leadership team: You need to provide answers to the board and your leadership team has relevant information. Raise the expectations and hold them accountable.
  • Admit when you don’t have an answer: Just like your leadership team, you will be scrutinized by the board. But you might not have all the answers. That’s okay. Admit it and go find the answer.
  • Do not do things that could inadvertently indicate that your organization is struggling: This one should be obvious, but now is a time when every move is unusually scrutinized. It is not the time for unusual equity or fundraising, pricing strategies, or promotions that could foster concerns from customers, counter-parties, or other stakeholders. Finally, public statements will be looked at more closely than usual. Be thoughtful in your messaging directed to the media, the regulators, and the public.

The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.

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