US Companies Not Worried About Long-term Impact of Recent Banking Turmoil, MoFo Survey Reveals

US Companies Not Worried About Long-term Impact of Recent Banking Turmoil, MoFo Survey Reveals

Global law firm Morrison & Foerster (MoFo) conducted a survey, which suggests that the recent banking instability resulting in the downfall of Silicon Valley Bank (SVB) in the US and Credit Suisse in Europe is not expected to lead to a prolonged crisis.

According to the survey, most companies believe that the banking sector's stress will only affect their businesses in the short term, with 36 per cent stating that it has had no immediate impact. The survey data revealed that finance-related or fintech businesses were more likely to be among the 34 per cent of companies that reported experiencing an impact.

Despite the short-term impact, the survey found that a majority of companies (64 per cent) expressed significant or moderate concerns that the disruption caused by the banking sector's stress would restrict their access to capital. Additionally, more than one-third (39 per cent) of respondents predicted that the situation would affect their company's long-term banking and spending practices.

The survey further highlighted that the recent banking turmoil has acted as a "wake-up call" for companies, prompting them to establish a robust crisis management framework. Nearly half of the respondents (49 per cent) acknowledged that their company lacks such a framework.

“The organisations that were best placed to respond to the banking crisis were those that had crisis management and business continuity plans in place to clarify decision-making authority, ensure resiliency and to provide a roadmap for response,” Alex Iftimie, co-chair of MoFo’s global risk and crisis management group, said.

The survey also said that some companies responded to the incident by diversifying their banking relationships, while others have opted for more conservative investments. In addition, some companies have expressed a need to reinforce their current policies, procedures, and operations in response to the episode.

According to Jackie Liu, a corporate partner at MoFo, recent bank failures serve as a lesson that companies, regardless of their size or maturity level, should prioritise financial resiliency. Liu noted that financial resiliency is not limited to banking relationships alone, but encompasses other factors such as liquidity, cash flow management, investment strategy, and overall financial controls.

Conducted in March, the survey gathered responses from 70 participants across various industries of different sizes, including finance, technology, and life sciences.