When the numbers fall apart: Crisis Management IV

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… hundreds of startup CFOs, controllers, and treasurers tried to log into their bank accounts as normal.

But this was anything but a normal day. Inside their Silicon Valley Bank (SVB) dashboards, wires sent the previous day (payroll, cloud services, crucial suppliers) were stuck in “pending.” In purgatory.

Others couldn’t access their accounts at all.

The $10 million raised in their Series A just weeks earlier was now in the custody of the FDIC.

Two days earlier, SVB was still the default operating account for the innovation economy. But in a Sand Hill Road conference room, a handful of prominent venture capitalists reached the same conclusion: SVB’s balance sheet looked weak. Rising interest rates had torched the value of its bond portfolio, and confidence was slipping. They told their portfolio companies to pull deposits. 

By Thursday, those Slack threads and founder group chats had snowballed into the fastest bank run in modern history. Customers tried to yank $42 billion in a single day. That’s roughly a quarter of the bank’s deposits. Enough to kill any bank, healthy balance sheet or not.

By Friday morning, regulators had stepped in and shut the doors.

A weekend of panic followed. Opening new bank accounts. Triaging payments. Building daily cash forecasts from scratch. Googling FDIC insurance (too late lol). Reassuring employees. Calling VCs for emergency Monday wires.

For 72 hours, founders and finance teams ran war-room style. Late nights. Emergency board calls. WhatsApp groups traded tips on which banks were still taking deposits. Messy, improvised, sometimes panicked, but necessary while no one knew what they’d be walking into when markets opened Monday.

Here was my advice in real time that weekend:

The cavalry arrived Sunday evening, when the Treasury, Federal Reserve, and FDIC jointly announced that all deposits, insured or not, would be guaranteed. By Monday morning, payrolls cleared. In the end, no one lost out. Well… apart from SVB’s shareholders and management.

Now let’s be clear: no CFO should ever have been caught with millions sitting uninsured in a single account. That’s finance 101. A cohort of “vibe CFOs” (great at raising money, light on core finance discipline) learned the hard way that cash management isn’t optional.

But the deeper lesson goes further. Financial crises can come from the place you’re watching, like a slow moving train wreck. Or they can sideswipe you outta nowhere.

Rates, regulators, supply chains, customers, even your own bank. The shock can come from anywhere. Part of the CFO’s job is to be ready to jump into gear when it does.

Intro

Here we are, wrapping up our September series on the crisis management playbook for CFOs:

But we’ve saved the best ‘til last. This week, we are putting the CFO in the spotlight and focusing on how to get the business through a ‘financial’ crisis and live to tell the story.

That could mean hemorrhaging cash, a covenant breach, a stock tanking, or even fraud. What do they all have in common? You’re the main character (remember, last week you were the “NPC” or “non-playable character”).

I’ve built my career by throwing myself into situations with a high risk of crisis in finance. That’s kind of what turnaround management is.

A mentor once told me that great finance leaders are forged in the eye of a storm.

My hair’s a little (ok, a lot) grayer now, and I don’t sleep as well as I used to. But I’ve always relished the moments when finance is answering existential questions about the business. When the entire company, CEO and board included, is looking to the CFO and their team to pull it through.

Let’s start by defining the different types of financial crises you might need to lead the business through…

The Four Horsemen of the Apocalypse

Here are the four flavors of crisis you need to be ready to lead on as CFO:

Let’s take each in turn:

1) The 3 C’s (Cash, Covenants & Creditors)

This is the scariest kind of crisis. The kind of crisis that looks like a stick of dynamite with a countdown timer on it.

While a crisis could occur in any one (or more) of the 3 Cs, they will each need handling slightly differently. But they have one thing in common: a 3 C’s crisis provides an immediate threat to the liquidity and/or solvency of the business:

These are things that can kill you.

Then there are covenant breaches. These sit in the middle. They don’t take you down on their own, but they do give power to your lenders to take you down. Banking covenants are designed as early warning signals for lenders that a liquidity or solvency issue is on its way. Breach a covenant, and your lenders now have a choice: work with you, or use it as their get-out-of-jail card to pull support.

But, at the end of the day, a 3C crisis is just a symptom. They’re what happens when a business isn’t capitalized properly, usually because performance hasn’t delivered.

By the time you’re here, you’re not pulling off some elegant strategic pivot. You’re treating symptoms. Like a defibrillator bringing a heart back to life: it buys you time, but it doesn’t fix the blocked artery.

2) Performance Crises

I’m not talking about ‘we missed budget EBITDA by 10% in the year to date.’ That’s a performance issue, or a missed bonus, not a crisis.

A performance crisis is more fundamental. Something that challenges the fabric of the economics of the business.

Addressing a performance crisis comes back to the fundamentals of a P&L. Something has shifted in your sales volumes, gross margin dynamics, or cost efficiency ratios that has thrown performance materially off track.

You have to square the circle.

Sometimes that means figuring out how to put things back the way they were:

These kinds of performance crises are (relatively) easier to solve. It’s more like hitting rewind than reinvention (see: 3 Cs). The goal is to put things back the way they were, with a few adjustments to ensure history doesn’t repeat itself.

Then there are foundational shifts. These are harder because you can’t just rewind. You have to adjust the balance between dynamics in the P&L:

Note: these aren’t issues that originate in finance. And they won’t be fixed in finance either. We aren’t talking root causes in this post, but on how you respond when you are in the eye of the storm.

But these are the moments great finance teams are built for:

That’s what real finance leadership looks like. I get a nice warm feeling just thinking about it.

3) Governance & Integrity (Fraud, misreporting, etc.)

The first two horsemen have a “we’re all in this together” vibe. They’re complex, often happen in good faith, and touch plenty of parts of the business. Often, despite the best efforts of the best people.

But governance and integrity issues are different. These are the moments when the finger points squarely at finance. Starting with you, the CFO.

We’re talking about when controls or reporting fail. You get defrauded by a phony supplier for $100k. You suffer a cyber breach. You discover a business unit has been overvaluing inventory for the last nine months. You find out deals have been booked early to hit quarterly targets, inflating revenue that doesn’t exist yet.

These things happen far more than people realize. They’re especially common in big, complex organizations.

For every one story you see in the press, there are a thousand more (less material) that never surface. And for every one you hear about inside a business, there were ten that got contained in the boardroom or the audit office.

Whenever I share these stories, I always get well-meaning but naive responses along the lines of: “I just don’t understand how this can happen.” That’s the wrong framing, and actually part of the problem. CFOs who assume things can’t go wrong are the ones who get blindsided.

The right framing is this: as a business grows and its accounting and control framework gets more complex, it’s more like Sod’s law: if something can go wrong, it will. Unless… you have disciplined finance operations covering every base.

That’s incredibly hard to do at scale. Complex workflows cutting across functions, and often even geographies. Different ERP systems held together with duct tape. Intercompany complexity. Complex commercial arrangements with high levels of judgment needed.

If something can go wrong, it will (unless you stop it).

These issues are scary. I’ve been caught by payment fraud a couple of times. There’s no feeling quite like it. Not just the fraud itself, but the bigger realization: once you know you’re compromised, you start questioning everything. Everything.

And when you’re the one signing your professional reputation against a set of numbers, that weight is hard to explain.

4) Investor Confidence

Most of the time, an investor confidence crisis is a symptom of one or more of the above. But not always. Just ask the CFOs of meme stocks.

I’ve been on the wrong end of a hedge fund actively feeding misinformation about the business into the press to drive bond prices down (and profit from the short trade). Then buying in at lower prices (well below intrinsic value) to try and build a position to take control.

It caused panic throughout our investor base. I spent weeks on calls reassuring them that it was all just bullsh*t that would pass. Time I should have been spending in the business.

Fortunately, if you can consistently avoid the first three types of crisis, you should rarely have to worry about crises in investor confidence.

Now what?

So when the shit hits the fan, what do you do? The balance sheets are at the breaking point. Cash isn’t just walking out the door… it’s sprinting. You don’t even know if your reporting is right. And investors have questions. Where do you start?

Here’s what I do:

5 Key Tips for Executing Finance Leadership Under Heavy Fire

1) Fire in the belly, ice in the head

Get yourself into the right headspace. First, for your own effectiveness. Then, because your mindset is contagious. Make it a good virus.

My mantra for this is simple: fire in the belly, ice in the head.

You need to both turn up the intensity and calm yourself down at the same time. Work rate goes up, decision quality (and velocity) goes up.

2) Find the “no regrets quick wins”

In the early stages of a crisis, information is scarce. The temptation is to sit tight and wait for more. Don’t.

Every crisis I’ve ever been part of (finance or otherwise) has had a handful of “no regrets quick win” opportunities. Decisions that buy you time, keep optionality open, and rarely come back to bite you. Here are some of the levers that can make a difference, and can be easily reversed if proven to be wrong:

There are others, and the precise menu depends on the nature of the crisis, but the key here is to buy some breathing room. And fast.

3) Break the forecast rhythm

In a crisis, conventional forecasting cycles go out the window (if they worked, you wouldn’t be here). You can’t afford to be off the pace, or stuck in a bottom-up model that’s too complex and too slow.

What you need is a simple, top-down forecast, driven by executive judgment and real-time feel for the business. Napkin math for the win.

For me, that means a crude but functional model, forecasting monthly operating profit down to cash flow and net debt, updated weekly.

I’d keep this model very close (inside the war room) with input from business unit CFOs and FP&A. Updating frequently allows you to constantly fold in new developments and iron out inaccuracies faster.

This isn’t the moment for elegant forecasting breakthroughs. Top-down intuition on unit economics and business fundamentals is faster, and often more accurate, than a bottom-up model that can’t keep up.

Yes, you lose a lot of granularity. But you are looking for speed and direction, not something comprehensive. The bottom-up work can catch up later.

4) Control the information surface

Every additional update, meeting, or curiosity call has a real cost. Last week, we talked about how the CFO can be the board and investor mouthpiece during a non-finance crisis. Giving the CEO time and space to focus. In a finance crisis, the roles can reverse.

Figure out the flow and cadence of updates for the exec, board, different groups of investors, banks, and employees. And potentially customers, suppliers, regulators, etc.

You control the fact base and the core messaging. Let the CEO run the packaging and the megaphone.

5) Keep your feet on the deck of the boat

One of the most common mistakes I see, especially in finance leaders, is stepping back too soon.

They’re hands-on in the eye of the storm. But as the crisis downgrades from a Category 5 to a 4, they ease off. Too early.

Don’t do it. Stay on the deck. It's much harder to catch up than to stay close. Your risk tolerance should be low, and your work ethic should be insanely high.

Only step back when you have real answers, stable footing, and confidence in the numbers… not just because things feel better than they did yesterday.

The opportunity of a crisis

If you’ve got the stomach for it, put yourself in situations where you are dealing with these kind of issues. You’ll learn the guts of your discipline faster than you ever will in a cushy job with 15% revenue growth and a 30% operating margin.

But not all crisis exposure is created equal.

There’s a big difference between living through a crisis and owning one. Running the finances for a $5B division of an F500 is a huge job. Especially if that division has a major performance crisis. But in that role, you’re still mostly insulated from the real-world financial consequences.

The real heat sits with the Group CFO.

You’re the one facing the banks after a covenant breach. You’re the one on the earnings call taking heat from analysts. You’re explaining to the PE fund why your performance just torpedoed their exit plan.

And, in extreme cases, you are the one signing an attestation on your accounts and controls when there are issues to solve.

That’s a different level of responsibility, and a different kind of learning.

To truly build financial crisis management muscle, you need time in a Group CFO seat. Even in a smaller business. There’s no substitute for being the one carrying the risk. Even if the numbers have one fewer zero on the end.

Good-time CFO roles are fun. Revenue is up, margins are strong, and investment decisions are easy. But it’s in the eye of the storm where you’re really tested.

In the sliding door moments (when Door A or Door B lead to very different futures), the decisions you make, quickly and with limited information, are the ones that define your company’s future. Not to mention your career. 

I hope this month’s CFO playbook on crisis management has added some tools to your kit. And remember…  when the storm hits, you don’t rise to the occasion, you fall to the level of your preparation.

Next up: we are heading into the world of private equity.

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Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.