Questions about what the collapse of Santa Clara, Calif.-based Silicon Valley Bank could mean for the future of the banking industry and the wider economy are still swirling for executives, regulators and other leaders, but the bank’s failure may also raise questions about how responsibilities are distributed and to whom in the modern C-suite. The CFO’s job in particular has changed rapidly in recent years, with financial leaders asked to take on further responsibility in areas outside of the pure finance function.
“Should the CFO be in charge of technology and cyber? Some CFOs are asked to do that,” Keith Meyer, CEO and board practice at Allegis Partners said in an interview. “How you think about juggling all this at the same time? I just think that’s a huge challenge, versus having a chief security officer that reports separately.”
Job creep stretches CFOs thin
Job creep has become a significant source of stress for CFOs, who often feel as though they are doing the bulk of the heavy lifting at their organizations — 81% of finance leaders believe their day-to-day has the most intensive work compared to any other role in the C-suite, CFO Dive previously reported.
Even as new areas like cyber and tech are laid at CFOs’ feet, they retain responsibility for finances— as well as bear the weight of consequences for financial mistakes. SVB’s former CFO Daniel Beck — together with former CEO Greg Becker— were named alongside the bank in a class-action lawsuit, Industry Dive sister publication Banking Dive reported Tuesday. The complaint alleged the executives failed to share with investors that rising interest rates would leave SVB particularly vulnerable to a bank run.
Meanwhile, Securities and Exchange Commission Chair Gary Gensler noted in a Wednesday statement that the agency is “particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly.”
“Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws,” Gensler said.
Understanding where the CFOs’ realm of responsibilities start and stop within a modern C-suite is critical, with SVB’s failure perhaps indicating the strain that further functions puts on financial leaders’ shoulders.
“I don't know if you should expect all CFOs to be head of compliance, head of risks and be able to function as an expert across all these areas,” Meyer said. “I just don’t know if that's possible.”
Risk: the buck stops where?
SVB’s collapse spotlighted who in the C-suite holds responsibility for risk and for communicating such risks to shareholders and the board.
While finance chiefs are definitely among those accountable for communicating these risks, the CFO “can’t manage everything,” Mohamed Chaudry, consultant CFO for London-based Kuick Consulting said. Especially within a highly-regulated industry like banking, where understanding risk, liquidity issues and other touch points is critically important, “you do need a specialist” such as a chief risk officer to come in, he said.
The absence of a chief risk officer at SVB for a large part of 2022, therefore, raises flags: SVB’s chief risk officer, Laura Izurieta, stepped down from the position in April 2022, leaving the role vacant until the hiring of Kim Olsen in January, sister publication Legal Dive reported Monday. The bank’s risk committee more than doubled the frequency of its meetings to 18 from its seven meetings in 2021, indicating growing concern over SVB’s position while it was without dedicated risk leadership.
As CFO, Beck was responsible for SVB’s finance, treasury and accounting functions, according to the failed bank’s 2023 proxy statement. Olsen, meanwhile, took responsibility for the bank’s “enterprise-wide risk management, corporate compliance and regulatory functions,” according to the proxy.
Some responsibility for SVB’s failure does fall with the CFO and CEO, Chaudry said — "the CFO should have taken the helm and said, I'm going take that responsibility, balance sheet risk lives with me and the CEO, at the end of the day, manages that whole ship,” he said.
However, the large gap between Izurieta’s departure and Olsen’s appointment also raises questions surrounding what was happening with SVB’s board, key committees and other top leaders at the bank.
“They lose a CRO, where there's no one there for so long — there's no urgency. There's nothing there from them, or the board,” Chaudry said, noting the CFO would most likely take on the CRO’s responsibilities in their absence. At the end of the day as a CFO, “the financial risk lies with me, so that should be something where I basically take over and I fill that gap in the interim.”
Firmly delineating between the finance and the risk functions may be one way to ward against overlapping responsibilities or stretching the CFO too thin.
“Should the risk organization be separate? I don't know. I think that's something the board needs to consider, especially in large, complex financial institutions — insurance companies, asset management firms, banks — where risk is the focus of everything,” Meyer said.