Last week, Silicon Valley Bank became the second largest bank to fail on record after a $42 billion bank run. Its problems are mostly financial—from above unprofitable investments in a public imbalance reported numbers of assets and liabilities.
But it turns, it faces another risk other Silicon Valley companies grappling with: the widespread adoption of remote work. As the COVID-19 pandemic begins to subside, America’s tech companies and innovation hubs are grappling with whether to do remote work. permanently. Like many companies, SVB decided to accept it, and reported on it 2021 files that it even onboarded new employees “completely away.”
“Some people work from Miami, some move to Las Vegas or a cabin in the woods and do the digital nomad thing,” a former banker told the Financial Times.
While the flexibility helped the employees, it may have caused SVB to fold on Friday. In 2023 it annual report released in February, the SVB, mostly employees who work remotely, acknowledged some of the frustrations of remote work.
“Recently, the COVID-19 pandemic has had a direct impact on our operations, including limiting employee travel and increasing telecommuting arrangements,” SVB said, adding that it “may experience negative effects of long-term work-from-home arrangements.”
With the adoption of remote work, SVB said employees may find it difficult to balance work and life, which may result in “reduced productivity and/or significant disruptions to our business operations.” Other risks from a work-from-home set-up for banking include online connectivity and cybersecurity threats.
The bank, in its latest annual report, outlined its plan to remain flexible while beginning to bring more employees into the office based on their “role and function.”
It’s unclear whether the largely remote work arrangement derailed SVB, but the company thought it was important to mention a month before it collapsed that it would have a “significant” impact on its business. Even top bank executives based in Santa Clara often work from different parts of the country and on different coasts. For example, former SVB CEO Greg Becker reportedly worked from Hawaii at times, while president Mike Descheneaux was from Florida, according to Financial Times.
Silicon Valley Bridge Bank, which is run by regulatory body the Federal Deposit Insurance Corporation, refused luckThis is a request for comment.
SVB may sound more like a tech company and less like its banking peers in giving employees the flexibility to work remotely rather than forcing them to return to work. One thing all banks say the same: that the need to get back to the office will depend on the roles of the employees.
JPMorgan Chase CEO Jamie Dimon said in January that remote work not good for “children or spontaneity or management.” Morgan Stanley’s James Gorman said earlier this year that he wanted to office workers “with other employees at least three or four days” and that remote work “is not an employee option.” Former Mastercard chief Ajay Banga said in February that employees “burn a lot of social capital” when it comes to until the interaction with “small squares on a screen.”
Sure, over the years, many banks—including the big ones—have collapsed without anyone blaming their work-from-the-office cultures or saying they could have been avoided if only they had been in charge. remote work. Just ask Washington Mutual, Lehman Brothers, and Bear Stearns—all failed while thousands of their employees toiled in their office cubicles.