Why CFOs Say Bear Markets Make Great Companies

The ongoing challenges of today’s macroclimate haven’t changed the conversation for CFOs.

Rather, it has renewed how critical focusing on the fundamentals is for finance leaders.

“You need to have eyes behind your head in this type of market and be fully aware of everything,” said Gary Vecchiarelli, CFO at bitcoin mining company CleanSpark, during a recent interview for “PYMNTS CFO Series: What’s Different?”

Bumps along the way, including the failures last month of Silicon Valley Bank (SVB), Signature Bank, and the self-liquidation of Silvergate Bank, have been a stark reminder about the risks that CFOs face daily, even those traditionally in the background.

“We’ve always taken for granted that our money is secure in a bank,” said Vecchiarelli, “but [last month’s mini banking crisis] provided a wakeup call for CFOs that many risks that may not be evident on a daily basis can be very real on a daily basis.”

He adds that it all goes back to ensuring that “your treasury management and banking relationships” start off on the right foot and come equipped with healthy communication channels, underscoring that for CFOs, “you need to know your bank and have transparent communications with them.”

Refocusing the Finance Team Around Risk Management Best Practices

The direction the CFO role is going toward marries finance and strategy by allowing organizations to not only have great numbers and understand their resource allocation and balance sheet realities but also to strategically extrapolate and execute against them.

Underpinning this new reality, alongside a suite of new digital solutions, is an increased focus on risk management.

“It’s important to stay disciplined — and it’s critical that your team both in operations and throughout the company have their eyes open and that everyone is rowing in the same direction,” Vecchiarelli said.

While CleanSpark is a public company with formalized controls, Vecchiarelli emphasizes that “for smaller businesses that aren’t working in the capital markets,” risk management is still a mission-critical process for CFOs and finance leaders, even if it may not be a formalized one.

His advice for other CFOs?

“Watch cost and don’t spend capital. And if you have the ability to raise capital, do it, because you might need that dry powder,” he said, noting that even when a business can be secure financially, down markets often provide a great opportunity to grow.

“Bear markets are a time when good companies become great companies due to their ability to grow and catch that uptrend when the market does return,” Vecchiarelli said. “But at the end of the day, CFOs can’t forget their fiduciary responsibilities and core principles: never spend a dollar if you don’t need to.”

Managing Cash Better Starts With Diversified Banking Relationships 

“It’s good business to have diversified banking relationships anyways,” said Vecchiarelli. “Not just from a treasury perspective, but also as it relates to the other services those banks can provide.”

He said that national and regional banks often come with very different services and customer experiences — and that beyond just having a backup, it is useful for businesses to diversify their relationships based on what they need or want to get out of their various banking partners.

“While national banks tend to have a greater breadth of services, including investment banking and greater access to international transactions; regional and community banks tend to have a very bespoke and high-touch customer service feel that is increasingly important particularly at the speed with which business occurs these days,” Vecchiarelli said.

Still, he emphasized that going beyond three or four banking relationships, particularly for a smaller or mid-market business, doesn’t make as much sense given the different requirements that maintaining a productive account entails.

“Looking at the FDIC (Federal Deposit Insurance Corporation) limits, most profitable businesses will exceed the $250,000 limitation,” Vecchiarelli said. “But if you have a profitable small business, you typically don’t have complex legal structures and it doesn’t make sense to have ten banks to cover your $2.5 million, right?”

As for what the CleanSpark CFO is most excited about looking forward?

“We’re excited about the prospect and future of what digital assets and specifically Bitcoin can do for the world,” he said. “There’s a lot, not just on the payment or store of value side, but what the industry will be able to do for business and the world as a whole.”