Risk management and governance are top of mind for every company builder after the SVB collapse. In this new era, how can we move to responsible innovation?
1.Run risk scenarios / play table exercises on your biggest risks
Start with a clear decision-tree, clearly communicated, on highest risks
Grow into ~quarterly exercise and more mature enterprise risk process as you grow. There is no perfect system, but even modest planning will be helpful.
Have a clear owner on specific risk areas and know who you will involve and communicate with in the event of a substantial risk
2. Pay attention to cash management forecasts and processes
Target: 1-2 year forecast for cash projection and 2-3 year forecast on operating expenses
Hold 2-6 months cash for immediately liquidity across multiple banks
Where banking is automated, be smart about what is built in other internal processes or systems
3. Who you hire and the culture you build makes a difference
Treasury is generally not a place to take risks. A treasury leader should be prioritizing return of capital rather than yield
It can be challenging to get early stage founders to focus on long-term risks
Creating simple models that show the cost of mitigating risks (e.g., by purchasing insurance) vs. discounted value of a potential loss can help make decisions about things that seem speculative
4. Diversify banking partners and holdings
One main banking partner, a few secondary partners, some additional relationships in case of future lending needs
Bank with tier 1 national banks (good for the long term), top tier regional/specialized (hold cash you need), and community banks and CDs - stagger duration (for excess)
Regional and community banks can often get to know you better - be willing to invest time in building these relationships
5. Communicate with your board
Your board can bring broader expertise (often sit on other boards)
Board and investors can help you get attention from financial partners
Cash management and treasury risk are always part of board duties and your board should be engaged and attentive to it
Stephanie PengisChief Financial Officer at Transcarent. Previously she served as the CFO at Teladoc Health, Senior Vice President of Finance at Livongo Health, CFO of Vida Health, and Chief Accounting Officer and Treasurer at Upwork.
Kyle Doherty is Managing Director, Investments at General Catalyst—a venture capital firm that invests in powerful, positive change that endures. Previously, he was Head of US Private Investments at Coatue Management and a Principal at Morgenthaler Ventures.
Stacie Faggioliis Chief Financial Officer at Swoop Search. Previously, she was Head of Corporate Finance at Stripe, Head of Strategic Finance at Dropbox, and worked in banking and private equity.