This article was provided by Neil Wilson (pictured), senior technology underwriter at Travelers Europe.
In the aftermath of a bank collapse, we feel the ripple effect – even when the event happens on the other side of the world. Whilst the failure of Silicon Valley Bank in the US is very recent and yet to be fully understood, as a major provider of capital to technology start-ups and early-stage venture capital businesses, the impact on the UK technology sector could be significant.
Whether a customer of a failed bank or a technology business looking to refinance, the banking landscape just got more challenging. Due to growth in the UK’s tech sector in recent years, at least one-third of companies in the UK were exposed to the bank. According to data from Companies House, the number of newly incorporated tech companies in the UK climbed from 38,240 in 2021 to 46,474 in 2022, a 22% increase.
As insurers, we aim to help clients anticipate and minimise these exposures, as well as mitigate the negative implications for their business when an event like this does occur (and economists do anticipate the potential for additional banks to fail). Brokers can start this conversation with clients, making sure they have a risk management mindset when running their business day to day, as well as protections in place to secure their business from unforeseen events.
A bank collapse can pose risks from both financial management and cybersecurity perspectives. Sound financial management calls for companies to diversify their risk across banks and not rely on just one. Beyond that, they must consider how a bank collapse might play out for their company. If your client’s business suffered from an unexpected event, how effectively would it be able to protect itself from breach of contract claims with customers? Such questions need to be answered as part of a company’s risk management planning.
The collapse of a bank also leaves businesses more vulnerable to attacks by online threat actors. In the wake of a bank failure, its customers are caught scrambling to protect their business. They may lose focus or neglect important cyber hygiene measures. Threat actors are counting on this.
Following the collapse of Silicon Valley Bank, a number of security research reports discovered threat actors registering domains related to the bank and preparing to launch attacks on business email accounts. They may have planned to contact former customers of Silicon Valley Bank to steal money or account details, or to infect these targets with malware – an effort that can be easier to pull off when a business is reacting to the uncertainty and stress of their bank’s collapse.
Such activity explains why phishing is a key underwriting consideration for us at Travelers. We assess how well a company’s employee training practices and existing protections such as multifactor authentication might protect against an attack.
The economic and geopolitical challenges of the past several years have put businesses to the test – and forced us all to manage a host of uncertainty. As threats evolve and become more sophisticated, companies will need to stay aware of the risks and take steps to protect both themselves and their clients.
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