About: This guide will help you think about how to minimise risk within your company.
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In these uncertain times we encourage all Fabric portfolio companies to have a risk register that you review on a regular basis. This will be personal to your business, and which notes down the key risks that your business faces. Giving a name to a risk and identifying it shows both commercial awareness and kickstarts a process of brainstorming what can be done in case of e.g. a bank run.
One of the risks that everyone in Web2 as well as Web3 has become critically aware of in recent weeks is supplier risk. The Silicon Valley Bank (SVB) debacle, which seemed to trigger voluntary liquidation for Silvergate, and was swiftly followed by Credit Suisse being forced into a bail out by UBS, has highlighted how quickly things can go wrong in the banking sector.
For those unfortunate enough to have all of their crypto/fiat rails with Silvergate, there were a few sleepless nights, not least about their ability to continue processing transactions!
This is a great lesson in making sure you always diversify suppliers, and to do proper due diligence.
In these uncertain times, check the various lists of “systemic” banks (those that are deemed too big to fail), since historically the Government has done all it can to protect normal deposits for residents in these banks.
Consider having at least some of your funds, be those personal or corporate with at least two of those. In our sector, it’s sometimes difficult to access accounts, so if you have to use alternatives, choose those that deposit their funds in the largest institutions.
And don’t try to be smart.. The more you chase yield, and buy fancy products, the less secure your deposits will be. We’d rather you had sleepless nights because you’re building 24/7 than because you are trying to get 3% more on your funds.
Deposit guarantees are formally limited to €100,000, but in practice this limit has only occurred when countries went bankrupt and deposits in main banks were lost.
Even for smaller banks, like SVB UK , the “the government” stepped in to rescue the situation and ensure deposits were safe, but that said, the further you move away from the list of systemic banks, and the further you are away from their home, the less likely that the authorities will be interested. Why should the State of Ohio care about protecting a deposit from a startup in Salzburg?
Systematic Banks HERE
Note: Team Fabric can not guarantee these banks won't fail, but historically the safest place to put your cash has been the same place as other resident business, citizens and government entities. Hide in the crowd.