How financial organizations and IT startups reduce their operational costs in challenging economics

Optimization of financial and human resources is a critical determinant of business returns. By managing these resources effectively, businesses can minimize waste and maximize productivity, increasing profits. Effective budgeting, cost-cutting measures, strategic investment decisions, and debt and credit management can cause all the mentioned improvements.

Not using this can cause a crash even for the most outstanding companies.

What happened to Silicon Valley Bank?

On March 10, bankruptcy befell Silicon Valley Bank, forcing it to cease operations after the U.S. Federal Reserve raised interest rates, scaring potential investors away from the bank known for its ties to global tech startups and venture capital.

Its collapse was the biggest collapse of a U.S. financial institution since Washington Mutual collapsed at the height of the crisis in 2008.

Why has Silicon Valley Bank collapsed?

So, what do you need to know about the causes of this collapse? Who suffered the most, and how it may or may not affect the U.S. banking system and worldwide?

But SVB’s customers mainly were startups and other technology-oriented companies, which have become increasingly cash-strapped over the past year.

Venture capital funding was drying up; companies couldn’t get additional funding for loss-making ventures. After they had to use existing funds – often deposited at Silicon Valley Bank, which was central to the tech startup universe.

So Silicon Valley customers started withdrawing money from their deposits. That was a slight problem at first, but due to the withdrawals, the bank had to start selling its assets to meet customer demands.

This situation required the sale of usually safe bonds at a loss. These losses increased to the point where Silicon Valley Bank became effectively insolvent. The bank tried to raise additional capital through outside investors but could not find them. So that as a result, the banking panic sunk the bank

An unusual technology-focused bank was wiped out by the oldest problem in banking and one of the few means guaranteed to bring about a bank’s collapse: a bank raid.

Bank regulators had no choice but to seize Silicon Valley Bank’s assets to protect the bank’s remaining assets and deposits.

How can financial institutions and startups reduce their operational costs?

It sounds strange. As the banks, who serve the most innovative world companies, could find a progressive approach to financial liquidity. However, in the case of American startups and technology giants’ financial problems, some tools help reduce these companies expense and increase profitability many times over. This tool is Outsourcing or the delegation of operational functions to outsourcing services providers. It reduces the financial burden and diversifies risk.

So, delegating operational services related to non-core activities (for example, customer support, accounting for financial institutes, IT support, etc.) is proven to help financial institutions reduce costs and increase part of their assets.

In conditions of risk and volatility, outsourcing helps companies remain profitable and influence their profitability at the expense of operating expenses without falling into the trap of social obligations.

Optimizing financial and human resources using BPO and outsourcing processes allows businesses to operate more efficiently and effectively. As a result it leads to greater profitability and a competitive advantage in their respective markets despite economic turbulence.