Macro Environment Puts CFO Spotlight on Working Capital Cadence 

When things spiral out of control, CFOs need to have the proper controls.

That’s according to Nathaniel Katz, chief financial officer at eCommerce software provider Rokt, who said during a recent interview for “PYMNTS CFO Series: What’s Different?” that having a strong risk management foundation and perspective “from the outset” helped his business weather the realities of keeping an account at Silicon Valley Bank (SVB).

SVB collapsed, while Rokt remains as strong as ever as it looks to go public.

“We have a pretty good risk management and crisis management process, so we were able to act really quickly for this particular event with SVB,” Katz said, underscoring the importance for CFOs of maintaining “good hygiene” around their relationships.

“[SVB’s failure] was a bump in the road and certainly took our time and attention for about a week, but ultimately it didn’t change our path or growth trajectory — we feel fortunate that we were able to react swiftly to the banking crisis and come out stronger on the other side,” he said.

As CFO, he plans to use the lessons learned from SVB’s collapse to invest further into future-fit maturations of Rokt’s risk management and crisis processes.

“It was a good impetus to get us moving in that direction faster,” Katz said.

Bank Risk Poses New Stress Test for Today’s CFOs

Speaking about the immediate fallout in the days after SVB’s collapse, Katz said SVB had a Triple B-rating “for a reason,” and that the mini-banking crisis last month as a “wake up call for a lot of businesses” that hadn’t given too much thought to diversifying their banking relationships, or bank risk more broadly.

“Coming out of that activity, we looked at updating our treasury policy to de-risk the types of institutions [we bank with] and diversify the vehicles we are investing in, as well as ensuring that we continue to have optionality between multiple, low-risk banking partners,” he said.

CFOs, in particular, should value options because having the ability to choose in the future is always more valuable than it might appear in the moment or present context.

“Option value is undervalued by most people, and in terms of banking relationships being able to have a backup option or a contingency plan around business continuity is important — and it spreads across all parts of the business,” he said.

Read More: SVB Collapse Has Companies Reviewing Financing, Cash Management Strategies

The “big lift,” noted Katz, was changing operations with partners, vendors and customers — and that those efforts were aided by a mix of digital and personal touches.

“We relied upon a combination of digital and then actually leveraging the relationships we had, having face-to-face or over the phone discussions with people we knew, and the combination of the two allowed to go broad and communicate with a lot of different parties at once while also keeping the white glove service for the partners of ours that are driving a lot of our business,” he said.

The aftermath of SVB’s collapse focused on ensuring Rokt’s customers had as seamless a transition as possible.

“Our finance team worked really closely with our customer success team in a widespread outreach program to ensure there was continuity of experience for our customers,” he said. “It was a really well-coordinated effort that was highly effective over a short period of time.”

He noted that as a fast-growing, larger company that is in the process of going public, his business was fortunate to “get a lot of attention” from banks in that environment, and considers himself fortunate to receive a high level of service and responsiveness in setting up new accounts — something that may not be the norm for smaller or newer businesses.

A Future Focus on Forecasting

While Katz believes there are still a “few chips to fall” relating to the banking collapses last month, what is important right now is for CFOs to “over index on reducing the risk profile of their investments for some time.”

“We need to get better with cash forecasting,” he added, “and I think that’s one area coming out of this that we will put more attention against – deeply understanding the seasonality and cadence of our working capital needs.”

That, he said, is the biggest lesson coming out of the crisis.

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