The possibility that your bank goes bust is more likely than you might think. Remember Silicon Valley Bank? Check out if you are prepared.

When Silicon Valley Bank collapsed in 2023, one of our suppliers at Yonder, the company I co-founded, was affected. We received urgent messages to change payment details immediately; already issued invoices were reissued with the new bank details and an urgent request to wire the funds immediately. Liquidity is the lifeblood of any company, and it looked like that 200M USD supplier was in a cash crunch due to the collapse of the bank.

In today’s world, a lot can go wrong. It’s not just the large issues, such as climate change or the return of war to Europe. Everything is connected, and the consequences of seemingly small events can be huge. We’re much more susceptible to crises than we commonly think — yet nobody dares to think the unthinkable. It’s because people still cherish the (past) good times, and they don’t recognize the need to build a crisis attitude.

In this article, let’s think about crisis preparation for a bank run, a bank collapse, or a move of your bank into another country.

Here are some aspects to consider.

1. Don’t Put All Your Eggs Into One Basket

It’s a simple rule, yet often ignored: Don’t put all your eggs into one basket. Decentralize your assets — that’s also true for your retail banking assets. I know most banks try to sell you a package of all banking products your company needs, but have you thought of the consequences of using such a package when that bank goes bust?

I suggest keeping accounts with at least two different banks — if feasible from a regulatory standpoint, even in two different countries. If you are doing business internationally, the same applies to currencies — keeping accounts in different currencies provides a natural hedge against FX fluctuations.

2. Buy Time

When the shit hits the fan, you need to buy time. Remember the example of our supplier at the beginning of this article? That 200M USD revenue company was struggling for cash. Because of a single bank collapse.

Besides decentralizing your financial assets, paying some of your expenses through credit cards with high spending limits can buy you a little time: Most of the hectic will be already over when your credit card invoice comes due. It’s similar to food stock: You don’t need to bunker up for 5 years; it’s sufficient to survive the first few turbulent weeks. That’s true for financial turmoil, too.

You can also use services such as Stripe and PayPal to pay and receive money. With such services, you can bypass traditional banks, both on the receiving and the spending side.

3. Good Old Cash

It doesn’t work for all businesses, but keeping a little cash to pay for the most urgent expenses in times of a bank run or a bank collapse is certainly a good idea. But as with the other preparations described above, cash doesn’t solve the problem on its own; it’s part of the mix of preparation measures that will ease pressure in dire times.

Conclusion: Are You Scared?

You don’t need to be scared. Thinking the (not-so) unthinkable is an essential skill for every entrepreneur. Don’t belittle other people’s crisis preparations, and don’t underestimate the speed at which the world can change for the worse.

Do you need help getting started to think the unthinkable? I have summarized my thoughts on crisis attitude and preparation in an eBook you can download for free.

Happy reading!