The abrupt collapse of venture capital darling Silicon Valley Bank has exposed several glaring governance and risk management lapses, including that it parted ways with its chief risk officer in April 2022 and appears to have operated without a full-time replacement for nearly the remainder of the year.
In its 2023 proxy statement filed March 3, SVB revealed that it initiated talks with chief risk officer Laura Izurieta to leave her job in early 2022. Pursuant to a separation agreement, Izurieta stepped down April 29, 2022, and moved into a "non-executive role focused on certain transition-related duties," which looked to be mostly an advisory role that included helping to find her replacement.
The filing did not explain what drove the departure of Izurieta, who'd joined SVB in 2016 after 16 years at Capital One, where she'd risen to executive vice president. She did not respond to a request for comment by ALM.
"Given the significance of the position of the Chief Risk Officer, it was important to the Company that the transition be facilitated in a manner that supported continuity and retention within the Risk organization as we searched for a new Chief," SVB wrote in its filing.
The filing noted that the new CRO, Kim Olson, started on Dec. 27, 2022. Olson came from Japan-based Sumitomo Mitsui Banking Corp., where she was chief risk officer for the Americas.
No Pilot, No Captain
The CRO's job is to manage the company's risk-valuation process, said Charles Elson, a retired professor of corporate governance at the University of Delaware. "Someone should be there to steward the operation and evaluate how the group is functioning. Without that, it's like having an airplane without a pilot or a ship without a captain. It will move, but to what direction? That's the concern," he said.
For a CRO role to sit unfilled for eight months isn't entirely unwonted. Clifford Rossi, a former chief risk officer for Citigroup's Consumer Lending Group, said his role also had been open for eight months before he joined Citigroup in 2007.
But the position is so technically complex that such a vacancy can be problematic. "It makes it difficult that risk is being properly managed across the enterprise," Rossi said.
Rossi, who is an executive-in-residence at the University of Maryland's Robert H. Smith School of Business, said he also was struck by the apparent lack of risk management expertise among board members on SVB's risk committee, to which the CRO directly reports.
Rossi said SVB's board, which represents shareholders, had a responsibility to ensure that management wasn't engaging in risky activities that could lead to a situation as dire and unprecedented as the $42 billion bank run that caused the institution to fail last week.
"You need people who can effectively challenge management on those decisions. I have personally been at those meetings at places like Countrywide, Citigroup, and Washington Mutual, where I was managing liaison," he said.
At SVB, Rossi said, "few had any level of knowledge around risk management to push back and ask the right questions. If the board can't ask the right questions, how can they represent shareholders?"
According to its 2023 proxy statement, SVB's risk committee members consisted of board chair and former Ernst & Young partner Beverly Kay Matthews, former U.S. Treasury Undersecretary Mary Miller, retired Kaiser Permanente chief information officer Richard Daniels, consulting firm owner Joel Friedman, and venture capitalists and investors Éric Benhamou, Kate Mitchell and Garen Staglin.
Noah Barsky, a professor in executive and graduate business programs at Villanova University School of Business, noted the absence of SVB board member Thomas King, a former Barclays investment banking CEO, from this group.
"He ostensibly has far greater substantive financial services experience than the committee comprised of a Napa vineyard owner, a retired healthcare CIO, a former U.S. Treasury undersecretary, venture capital partners and consulting firm heads," Barsky wrote in an analysis for Forbes.
