Good day all. People are still digging through the wreckage that was the Silicon Valley Bank, trying to figure out how they got themselves so deeply in the hole. The short version is that instead of dealing with Risk analysis, they were more concerned with diversity, equity and inclusion.
The Risk department in any financial “House” has one job. Protect the bank or investment company’s assets from risky investments. Any investment is risky of course, but a good risk department will be able to provide guidance to minimize the risk to the firm as much as possible. It turns out that for almost a year prior to the collapse of SVB, they didn’t have a Chief Risk Officer. Here are the details from Fox Business News:
Silicon Valley Bank (SVB) did not have a chief risk officer for the last eight months of 2022 as it barreled toward collapse – even as it employed a chief diversity officer over the same period.
Apparently, the previous Chief Risk Officer, Laura Izurieta, left the company. (Or she headed to the life boat when she saw the iceberg on the horizon and no one would listen to her)
From April 29 through the end of the year, the bank navigated through rising interest rates and a slowing economy without a chief risk officer at the helm until the company announced the hiring of Kim Olson to serve in that role on Jan. 4, 2023.
By then it was far to late to do anything. It would have taken several months for the new Chief Risk officer just to get up to speed, and by then the Stuka’s had already released their bombs and were pulling out of their dives. (Sorry, I was watching a YouTube video on the Stuka just before I started working on this post)
From April 2022 until the bank imploded under a liquidity crunch and was taken over by regulators last week, Silicon Valley Bank employed Angela Morris Lovelace as its chief diversity, equity and inclusion (DEI) officer.
So Silicon Valley Bank was more concerned with Being Woke then they were in managing their financial risk? How stupid can you be? I’m no lawyer, but I think that the people that were running that disaster need to get one. There are a lot of very angry investors and depositors out there looking for revenge compensation for their losses.
It is not clear who handled Izurieta’s duties in the last eight months of 2022. Silicon Valley Bank did not respond to a request for comment from Fox Business; the Federal Deposit Insurance Corporation and Federal Reserve declined to comment.
I have a sinking feeling that no one was really handling the Risk department. I expect the people who should have been were to busy working on their Woke and DEI credentials.
Bloomberg reported this week that the bank’s lack of a chief risk officer for most of 2022 is part of a Federal Reserve probe into the bank’s collapse.
Now as to what exactly a Risk Officer does? Here is how Fox Business explains it.
A chief risk officer typically monitors procedures in order to limit operation exposure to risks, and SVB said at the time of Olson’s hiring that she would “lead the Risk function and team, developing and maintaining SVB’s risk management framework and a culture of risk management across the company.”
As you might imagine, this is a critical position. Even with a first rate Risk Officer and team, things can and do go wrong. Without one? Failure is almost a certainty.
Social media critics, primarily conservatives, have criticized that the bank kept a DEI officer and reportedly focused on DEI and ESG (environmental, social and corporate governance) policies as the bank was crumbling behind the scenes.
This week, Republican presidential candidate and venture capitalist Vivek Ramaswamy called Silicon Valley Bank “one of the biggest evangelists of DEI and ESG.” Utah Republican Sen. Mike Lee took aim at the company on Twitter, pointing out that ESG and DEI were not enough to “save” the bank.
No, but ESG and DEI were certainly enough to sink it. There are a number of Investment management and financial services companies that are all in on ESG, such as Blackrock. However, investors have noticed that the funds these company manage aren’t doing as well as those that eschew ESG and DEI and instead concentrate on making money for themselves and their clients. With the collapse of Silicon Valley bank, a lot of these Woke companies are starting to rethink their strategies.
There is a saying out there that started a few years ago when Woke companies started failing. It goes “Get Woke, Go Broke.” The implosion of Silicon Valley Bank might start a major rethink by the rest of the banking and financial services companies on the who Diversity, Equity and Inclusion nonsense. Instead of hiring people based on their pronouns, skin tone or what they claim is their gender, they need to go back to hiring people who can do the damn job. If they don’t, we’re going to see a lot more of these major failures.
Thatisall
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