Main Triggers of the Silicon Valley Bank Episode and How They Could Have Been Avoided
What were the main triggers of the Silicon Valley Bank episode and how could they have been avoided?
Final answer:
The main triggers of the Silicon Valley Bank episode were linked to the late realization of risky financial practices and a dismissal of regulations. The disaster could have been prevented by implementing more stringent corporate governance and risk management practices, including better oversight by boards of directors.Main Triggers of the Silicon Valley Bank Episode and Prevention Strategies
Critics had warned that the nation's economy was heavily dependent on the stability of a few banks and investment firms. Despite these warnings, the record profits made by these firms until 2007 masked the imminent signs of disaster, making the warnings go unheeded.
It was not until the venerable New York investment bank Bear Stearns approached bankruptcy in 2008 that panic spread throughout the financial system.
The main triggers can be attributed to a lack of understanding of the risks involved with complex financial products, and a widespread belief that government regulations were hindering economic growth. In retrospect, the situation could have been avoided with better corporate governance practices, such as a more critical oversight by boards of directors and risk management teams, as well as a balanced approach to regulation that allowed for both innovation and stability.