A New Era in Risk Management: Lessons from SVB’s Collapse

Article

The collapse of Silicon Valley Bank (SVB) highlights critical vulnerabilities in interest rate risk management, liquidity risk management, board governance, and regulatory supervision, offering essential lessons for the financial sector.

Jun 11, 2024

Emma Hagan, UK Chief Executive Officer, Clearbank

A New Era in Risk Management: Lessons from SVB’s Collapse

The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization

SVB's collapse was primarily due to significant failures in interest rate risk management, including inadequate hedging against rising rates and lack of diversified funding sources.
Effective board governance and oversight are crucial, requiring proactive, informed, and deeply involved boards to ensure robust risk management strategies are implemented and adapted to a rapidly changing environment.
Regulatory supervision must evolve to address the complexities of modern financial institutions, focusing on interconnectedness and potential rapid contagion effects.
Scenario planning and stress testing must account for rapid, social media-driven events, ensuring liquidity stress tests and recovery plans are robust enough to handle massive, rapid outflows.