Even the biggest companies aren’t entirely self-sustaining. They require a network of vendors and partners to grow and maintain their everyday operations, and with an extended network comes an extended realm of risk.
Even with long-standing, trusted partners, you need to remember that their problems can become your own. In order to protect their reputations and businesses, founders and their communications teams must prepare for the right response when third-party risk becomes a firsthand problem.
A recent example of this third-party risk was the precipitous fall of Silicon Valley Bank, a trusted partner to many businesses, including startups. While the bank’s ultimate collapse was a result of many poor decisions, the extent of the damage and aftermath were, unfortunately, highly avoidable.
A series of communication errors led to reputational damage and financial losses not just for themselves, but for those that banked with them. The long-tail impact on the startup community was substantial; a recent report revealed that 84% of VC-backed startup founders were impacted by SVB’s collapse and 46% of those impacted immediately turned to a PR firm or professional for narrative control.
When SVB collapsed, we weren't directly affected…
…but many of our customers and partners were. And it became clear they needed guidance on what to say to their stakeholders—as did we. My company, Embroker, provides tailored insurance packages for businesses. While outside of the traditional scope of an insurance policy, we wanted to make sure that our customers were empowered with the tools and information they needed.
Even before the collapse, we were thinking about how SVB could affect our stakeholders. And immediately after, we connected with our PR agency to outline each audience that required outreach and the unique messages we would tailor for each.
No company is an island, and that includes ourselves. While we engaged with our PR firm, we also had to consider that we are a company backed by a series of investors, some of which were likely concerned that their investment was going to face attrition due to SVB.
When all was said and done, we developed and distributed five different bespoke messages: to our board, our investors, reinsurers, customers and broker partners. Our agency provided counsel on how to approach these messages and developed a reactive-only drawer statement for media to ensure we had consistent, targeted and thoughtful messages for each of our core audiences.
While we could have ended it there, we also worked with our agency to research how the situation was unfolding, so we could better lend insights on how Embroker could support impacted businesses. They were our external eyes and ears, tracking and analyzing real-time narrative shifts, competitor and industry messaging, the evolving social media coverage of the collapse and any regulatory response.
Together, we commissioned a survey of startup founders to get a real-time read on how they were handling the situation, if they were impacted and how that impact may change their behavior or risk outlook going forward. The data helped inform our business and others on what founders were thinking and feeling post-SVB. Gaining this insight into the startup community helped us keep our finger on the pulse of real-time shifts in risk tolerance.
We also invited our agency into our internal communications, making sure those within our company understood what was happening and how we could support customers and partners directly affected. As an InsurTech company, our goal is to make sure businesses have the right protections in situations like these.
By taking these communications steps proactively during SVB’s collapse, we were able to ease anxiety internally and for our key stakeholders, customers and partners.
Handling a Third-Party Crisis
So, what can you do when you find yourself in the same unfortunate situation?
Don’t get caught off guard. Create a business and communications plan for any sort of crisis—your company’s or a third party’s.
This is something many adopted post-COVID. Before the pandemic, it’d be hard to imagine drafting a work-from-home statement or a stance on employee health and wellness. Our culture changed almost instantly, and we now see that we must prepare for even the most unforeseen events.
Preparation can look different depending on each business’ individual needs. We asked startups what risk measures they currently have in place, and the answers ranged from setting capital aside to float the company during emergencies (44%), a liability transfer plan through insurance or other means (38%) and plans for downsizing or reducing payroll (38%).
Businesses must be prepared to move dynamically through a crisis, especially one that has a direct and immediate impact on financial elements of your organization. It’s important to stay current with the evolving crisis, and not bury your head in the sand of your messaging.
Think beyond just your own four walls. Conduct a risk analysis of your third-party partners and vendors to identify where external risks could emerge.
Don’t let SVB’s closure be a lesson unlearned. Now is the time to review each of your external partners and vendors and assess the impact they might have on your business should they experience a crisis. If your main supplier suddenly went under, would you be able to pivot or have messaging ready to let customers know about delays?
These plans will range from the simple to the complex, based on the relationship and the situation, but even the most tertiary relationships can directly impact your company. Having strong relationships with external partners and vendors can also help your business be informed early on of any crisis they might be facing. Being early to a crisis is the best way to stay ahead of it and build a plan that works for your business.
Diversification of partnerships can help to mitigate risk and spread it across multiple parties. Relying solely on one partner, as many businesses did during SVB’s collapse, can leave a company vulnerable to crises and unexpected challenges. Diversification can provide companies with alternatives and buffers during uncertain times.
Build a team of experts. Make sure you have communications experts, as well as legal counsel, to prepare and respond to crises.
This is the most important step you can take; when it comes to a crisis, having the right mix of team members involved can make all the difference. When operating with others, you’re able to source from a variety of backgrounds and experiences. When acting alone, you are limited in your perspective.
Whether your team is sourced internally through a crisis response program, or you engage with a communications partner, having experts across disciplines invites the best possible solutions to the table.
Leveraging the experience and expertise of communications professionals can make the difference in whether or not a company makes it through a crisis. They can help with effective messaging, crisis strategy, media handling, reputation management and post crisis recovery.
The most proactive of them all, effective messaging helps businesses to craft materials at the start of a crisis that convey necessary information, demonstrate empathy and maintain the organization’s reputation. This step helps to maintain the organization's reputation and prevents the spread of misinformation around a crisis.
The best thing founders can do is soak up the takeaways and lessons learned from SVB so they don’t make the same ones. Even though we don’t know when the next big crisis or risk will come for our business, we are now prepared to handle it with a proactive communications strategy in place.
Mike McLean is Senior Content Marketing and Communications Manager at Embroker