It all began with a press release.
On March 8, Silicon Valley Bank (SVB) issued a statement announcing that it intended to raise $2.25 billion through sales of common stock and depository shares, after a $1.8 billion loss in its investment portfolio. Perhaps the doomed bank’s leaders assumed that the colorless prose, stripped of any context or assurances of the bank’s liquidity, would reassure depositors. Instead depositors pulled out their money as quickly as they could, and the bank collapsed.
Silicon Valley Bank may be remembered as a textbook case in how not to handle public relations in a crisis. An impenetrable press release that failed to come clean with depositors or answer basic questions prompted a runoff that wiped out the bank in a matter of days. This time, the Federal Deposit Insurance Corp. stepped up with a release of its own, declaring unequivocally, “Depositors will have full access to their money.”
This crisis has all the markings of a modern Washington Beltway political hurricane. Thousands of tweets bear the #SVB hashtag, and Twitter owner Elon Musk offered his own take on what the FDIC should do. Senate Democrats plan to grill former SVB executives on what precipitated the bank’s collapse. Senator Elizabeth Warren, D-Mass., one of Wall Street’s most persistent critics, called for an accounting within 30 days of regulatory and policy failures.
The Republican-controlled House also plans to spotlight regulatory lapses, beginning with hearings in late March. Some voices on the right, meanwhile, suggested that SVB’s demise may have been due at least in part to its embrace of diversity, equity and inclusion at the expense of fiscal management.
While the fallout from the bank’s implosion continues to rain down, we can draw a few lessons about managing a crisis in today’s cacophonous media environment:
Communicate clearly and effectively: Contrast Silicon Valley Bank’s final pre-collapse press release that “SVB intends to use the net proceeds from the offerings for general corporate purposes” – to the clarity of the initial FDIC release announcing it will provide bank account protection. Which is more likely to calm jittery investors?
Remember that markets consist of people, and people react emotionally: SVB may have thought that burying bad news with dry investor relations language would cause markets to react with a shrug. There’s a time and a place for corporate-speak, and it may be mandated at times for compliance purposes. But when the future of your enterprise is at stake, it’s best to level with stakeholders and treat them as human beings. A lack of transparency will come to light eventually and provoke panic and distrust – two emotions that move markets more than any other factor.
Get out in front of the social media maelstrom: About 4 in 5 U.S. adults use social media, and it will remain as a bellwether and driver of public opinion. During a crisis, social media is often the most immediate way to engage with stakeholders and drive messages to larger audiences. Lack of engagement is ceding this territory to opponents and misinformation. Instead, run positive digital ads in key locations to build a proactive baseline of positive messaging, target key events and audiences, monitor and target competitors, and recalibrate as needed to make sure your favorable content is breaking through the noise.
Prepare for oversight – the storm after the storm: Any major crisis is likely to trigger calls for oversight, bringing the inevitable congressional hearings and demands to reform the system. In today’s divided Washington, that usually doesn’t mean sober-minded discussions on learning from systemic failures and adopting bipartisan measures to avoid repeating them. Rather, it more likely means exercises in partisan finger-pointing, with diversions into red-meat social issues that bring more heat than light. Avoid getting dragged into this type of framing. Instead, act strategically about social threats to your enterprise, remembering that 72% of your stakeholders say they’ll remember your response long after the immediate crisis has passed.