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Silicon Valley Bank’s fallout underscores the importance for FinServ execs to create robust business continuity plans for fintech relationships.  

Silicon Valley Bank’s implosion threatened software startups that relied on it, forcing financial services CIOs to take stock of the potential impacts on their partners. The situation highlights how important it is for execs to build backups into their technology supply chains. 

Silicon Valley Bank’s rapid fall will continue to have ripple effects throughout the banking and tech industry.  

Before US regulators announced plans on Sunday to protect SVB’s clients – many of which were tech startups, including some of Insight Partners’ portfolio companies – corporate leaders rushed to assess the stability of their vendors. They needed to understand whether there would be any impact on their firms’ own operations if tech providers in their supply chains needed to shut down because of SVB’s collapse.  

As a result, one key reminder emerged for those CIOs and other tech execs: Expect the best but prepare for the worst. When it comes to critical software, your firm should always have a contingency plan in place should something go wrong.   

For example, Magesh Sarma, CIO and chief strategy officer at AmeriSave Mortgage Corp., told The Wall Street Journal that the firm has back-up plans in case of vendor failures.  

“We have redundancy and fail-over in place for all critical services, because we cannot control what we cannot control,” he said. “It’s better to be prepared.”  

Figuring out a business continuity plan from the outset is key to any new fintech relationship. Even before the SVB fiasco, banks have realized that working with innovative, fast-moving tech startups involves a certain amount of risk. For example, Insights Distilled previously highlighted how Wells Fargo locks down its strategy for managing customer needs if a fintech winds down from the very beginning of a new relationship.  

“We figure out how we’ll ensure that – if something happens – it’s seamless to customers, that they can go on managing their finances,” Wells Fargo’s head of digital Michelle Moore said at the time. The bank obviously hopes that any startup it works with will succeed in the long run, but it still creates a plan for its demise.  

Running through worst-case scenarios is crucial: “My legal, risk, and compliance partners are my best friends,” Moore said.    

SVB’s fall is the second high-profile event this year to underscore the importance of backup plans: When a cyberattack crippled financial software firm ION in February, the disruption forced its banking and broker clients to resort to manual trades to keep markets whirring.