In-House Counsel

How GCs Can Support CFOs In The Wake Of The Silicon Valley Bank Failure

It takes preparation to successfully navigate choppy financial waters, and an existing company-specific crisis plan should form the basis of any GC’s action.

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disaster strikesOn a daily basis, the general counsel’s prime directive is always clear: take care of the company. But during a monumental crisis such as the failures of Silicon Valley Bank (SVB) and Signature Bank, GCs must change priorities and use their time to act while under extreme pressure.

In midsize-to-large organizations, crisis-response effectiveness almost always depends on the clear understanding of data (operational, risk allocation, and organizational) and speedy analysis. With access to technology that allows quick surveys of contracts and customer/supplier relationships and a GC’s keen understanding of the company’s exposure, you’ll be able to rapidly deliver quality decisions — and protect the company while helping the CFO steady the course.

It takes preparation to successfully navigate choppy financial waters, and an existing company-specific crisis plan should form the basis of any GC’s action. But in a crisis like SVB’s failure, you must also ask how it might affect cash flow — the oxygen your organization breathes. You’ve got to examine any contracts or obligations with direct ties to cash flow and work with the CFO and other internal and external colleagues to systematically address those issues.

In addition, GCs can employ some other boots-on-the-ground tactics to help companies avoid an SVB-like meltdown.

Prioritize Next Steps

In a cash-flow crunch, your first two responsibilities are increasing accounts receivable and reducing accounts payable. Hopefully, you’ve built positive, long-term relationships with suppliers, customers, regulators, and financial houses. Together with the CFO, you need to study existing contracts to figure out where those relationships can help the company maintain footing. Figure out where you can pay late or snare a discount with prepayment. Are there exclusivity or licensing issues that could be affected by emergency measures? What will affect reporting or other obligations?

Assess The Risks

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In addition to cash flow, you’ve got to assess reputational risk and potential exposure to security, regulatory, and litigation concerns. Will you lose top talent or suppliers that turn to other customers? Who do you need to communicate with?

Contracts tell a story; they’re a map to help your firm find its way to the port. Which payment obligations can be stopped with less risk and fewer consequences? Which aren’t material to the business? Which can be suspended because of permissive clauses or relationships? And which are at-will and can be terminated at any time?

Integrate Your Systems

Great decisions require speed and accuracy. Ensure your contract lifecycle management (CLM) systems work with your sales database, enterprise resource planning (ERP) systems for supply-chain management, accounting systems, and enterprise legal management (ELM) software.

Your ELM will give a more holistic view of relationships — including past co-promotions, points of contention, or even the likelihood of litigation. When integrated with ELM, CLM connects transactional contract data and provides insights into how each relationship works. Who got a discount and why? Can we negotiate pricing, discounts, or terms with our vendors? The technology pairing provides a quick data bridge that’s especially valuable during time-sensitive moments like the SVB response.

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Delve Deeper

Once your CLM and ELM are integrated, you can use the data points to conduct in-depth due diligence and figure out who might be able to help. Is there someone who’s willing to work with revised contract terms for payment, or who’s still mad about that last negotiation?

Once a crisis passes, you’ll want to continue your deep dives to ensure you’re up to speed on your company’s details and ready for the next event. Revise your crisis plan, and run a stress test to determine your company’s resilience.

And remember, always be your CFO’s most valuable partner.

Olga MackOlga V. Mack is the VP at LexisNexis and CEO of Parley Pro, a next-generation contract management company that has pioneered online negotiation technology. Olga embraces legal innovation and had dedicated her career to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and more inclusive than before by embracing technology. Olga is also an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor, and entrepreneur. She founded the Women Serve on Boards movement that advocates for women to participate on corporate boards of Fortune 500 companies. She authored Get on Board: Earning Your Ticket to a Corporate Board Seat, Fundamentals of Smart Contract Security, and  Blockchain Value: Transforming Business Models, Society, and Communities. She is working on Visual IQ for Lawyers, her next book (ABA 2023). You can follow Olga on Twitter @olgavmack.

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