TriNet Group, Inc. (TNET) Earnings Call Transcript & Summary

Hello. And thank you all for joining us today for our webinar addressing the topic, Weathering the Storm: Critical Considerations for SMBs to Navigate the Current Banking Crisis. Before we begin, I just want to cover a couple of housekeeping items. First, this webinar is being recorded. The replay will be available within 1 day after the webcast and can be accessed using the same link that brought you here today. Second, I want to make you aware, there will be a brief survey upon conclusion of this webinar. We'd love to get your thoughts on the information we provide about this subject and hope you can spend a minute or 2 to share your opinion with us. And with that, I'd like to now pass it over to Samantha Wellington, TriNet's Executive Vice President for Business Affairs and its Chief Legal Officer; and Alex Warren, TriNet's Chief Revenue Officer. Samantha and Alex will lead the discussion from here. So Samantha, please take it away.

Thank you so much, Jeff. Welcome, everyone. Super pleased to be here with you all today. I am just going to get through my traditional lawyer slide and then we'll kick off. This presentation is obviously for educational purposes only. TriNet specifically does not provide legal, tax or accounting advice. Thank you so much for being here. And Alex, thank you for being here. It's been a while.

It has been a while. So I'm looking forward to getting through this topic.

Indeed, indeed, all right. So our focus today is going to be giving you things to keep top of mind as we all navigate the recent bank closures, namely addressing business continuity planning and access to liquidity. We're going to set the stage by helping all of you to understand how TriNet has navigated the crisis. I do think the best way to think about how you might apply business continuity concepts to your own business is by seeing a real-life example of how business continuity works in a company and then look to apply those real-life examples to your own circumstances, which are always going to be different. But seeing how a company manages these things, I do think helps to give ideas on how you should be thinking about them. So before we get to it, I do want to say business continuity planning sounds really fancy. And so it sounds like it needs a binder to hold it or a glass case to keep it in with a sign that says like, "In emergency, break glass." It's really just you thinking about and hopefully writing down the key areas in your business that would present risk to your ongoing ability to operate and what mitigation techniques you have in place to solve for that. So part of your business continuity planning might be a line of credit at a second bank to your primary bank that would allow you to cover a month of payroll. So business continuity planning is really just a fancy way of saying thinking about all of the things that you do if your business is in jeopardy. So it's during times of crisis that a TriNet will get to walk the talk. As you'll see on the next slide, navigating a crisis is nothing new for us here at TriNet. And I'm sure that there are a number of you today who attended one of our many COVID pandemic webinars. From our perspective, we've taken the same overarching approach through any crisis to help you take a control in uncertain times. And that's not to say that each crisis doesn't present you challenges, they all do. But business continuity plans minimize major stakeholder risks and allow us to keep our customers at the center of everything that we do. So our business commonly plans were essential for TriNet during the recent banking crisis. And because these banking events represented a crisis at TriNet because we had customers that bank with Silicon Valley Bank and with Signature Bank. And whether you're a HCM or a PEO customer, you rely on TriNet to get your people paid. So whilst TriNet's own operations were not at risk, our customers were. And they needed us to act. So Alex, could you just remind everyone of how it all went down?

Yes. And thanks, Samantha. I think I'm going to go through the timeline of events, not to sort of reiterate each item as it's happened, but the reality is, as I go through this, think about how each one of these events made you feel. And it should help direct you to the areas you want to pay particular attention to in your business continuity plan going forward. So as an example, if you did bank with SVB, and on March 8, when they announced that they were seeking to raise $2 billion in capital, did you at that moment in time already have a plan to move funds? Or were you not in a position to do so because you didn't have a second bank?

So Alex, I just want to stop you there because I do think it seems a little bit disingenuous to be telling a small business that they should have a second bank account, ostensibly that it holds a deposit large enough to cover a payroll run and a week's worth of bills. So...

Yes, I think that's right. But I think what we're trying to identify is, in that moment, the reality of an event like this should identify risk in liquidity in any business. And in this particular case, what a business should be thinking about is setting up a secondary bank account that has a credit line that could potentially provide access to liquidity to cover any gap in funding. And that's kind of what we were working through on the day-to-day as these were happening. And so let me recap sort of at least the timeline, so we can all get oriented to that. So on March 8, SVB, or Silicon Valley Bank, announced that it had sold substantially all of its available-for-sale securities at a loss of $1.8 billion. And it was seeking to raise over $2 billion of capital to reposition its balance sheet. So naturally, on March 9, shares of Silicon Valley Bank fell over 60%. And reports begin to emerge that various significant depositors are withdrawing millions from the bank. A run against Silicon Valley Bank begins. On March 10, the FDIC announces that Silicon Valley Bank has been closed by California authorities and that the FDIC has been appointed as its receiver. On March 12, the FDIC -- excuse me, the Federal Reserve and the FDIC announced that the FDIC has assumed control of Signature Bank and that depositors of both -- or Silicon Valley Bank and Signature Bank will have access to their deposits starting March 13. On March 13, the FDIC releases a statement that all depositors of the institution will be made whole under the systemic risk exception approved on the 12th. So this is just sort of an overview of, and I think people should pay attention to, the gap between March 10 and what was then announced on March 12 to help you sort of think about where your continuity plan was at any point in time during that. And while the next unforeseen crisis will be something we can't predict, we can talk about putting plans in place to prepare for any crisis, which is what we do here at TriNet. And we're going to share some of the experience with you today. I'd also like to reiterate something Samantha said is we're proud of our ability to harness scale in support of our customers. And we take pride in the fact that it's one of the reasons why you choose TriNet. Okay. As a point of reference, I think it makes sense to talk through how we activated our own continuity plan so that you can see how TriNet approaches continuity in situations like this. And I think -- I want to make sure everybody understands because you've seen us talk before about this. Some of the programs that we implemented almost instantly as a function of this crisis were created and worked through, through COVID. So it's a good reminder that whatever plan you have in place can always be adjusted. You can then adopt and learn more things as you go through crisis like this.

And I think, Alex, just we talked about that a lot during COVID, right, the idea of having a framework and a framework against which you're making decisions and taking action. And I think it's -- I do think it's really instructive that the framework that we utilized over the course of the last couple of weeks and the framework that we're utilizing in all of our crisis management is built on what was created through COVID, right? So you're always going to refine and improve and make it better. But the actual operationalization of the framework builds on that experience. And I think anyone who is on the phone and went through that, you have the experience that you can be leveraging.

Yes. And I -- so let's go through how we did it. At TriNet, we have dedicated teams to support organizational readiness and are -- for us as well as our customers in times of crisis. And by March 9, those teams were activated. We internally call it the control tower. And at a very high level, all of our crisis response protocols were activated, and we focused on the areas established to tackle the unfolding issues. So from March 10 through the 12, we focused on understanding and contacting our impacted customers, developing an outreach strategy and coordinating with our ecosystems to mitigate risk. On March 13, on Sunday night, the Fed steps in and introduced some calm. And we were able to focus on filling out relevant content for our TriNet customer resource microsite to enable seamless access to available information for our customers. And for those of you who remember, the microsite, we deployed for the very first time during COVID and have now used that as an effective mechanism to get information to our customers so that they can see as content is being written, we can put that information out there. And you may be able to establish that internally for your own business to figure out when something like this happens, we have found that communication is one of the challenges that you have to overcome and you have to think about. So I can see you getting ready to jump in there.

Yes. I was actually going to take us to the next piece, which is this idea of sort of -- I apologize, I've -- there we go. So what -- because I was taking it straight to communication. And this idea of communication during a crisis is key. And the reason why communication in a crisis is key is because it allows you to do everything else that you need to do. So if you're effectively communicating and getting information out there, then you can be involved and engaged in doing the work that needs to be done to manage through the crisis. So more is more when it comes to communicating during the crisis. You want to err on the side of overcommunicating. We coordinate across -- in this crisis, coordinated across three key communication areas: our customers; our colleagues, so our internal workforce; and our ecosystem. So our customers, we deployed communications. We made outreaches to impacted clients with what they needed to know as well as Alex was referencing a microsite to house additional information that we felt would be useful for customers. You can see our public communications on our website, one of the great things that is useful to have handy in a crisis. And if you think about it now, it will be ready for you when you next need it. If you really think about a framework for how you might deploy public segment, right, where this thing has happened, here's what -- how we're currently engaging with it. This is what it means for you, my stakeholder. And if you've got a framework like that, that you can deploy in any circumstance, it will make it easier and faster for you. You won't have to think as much about it because it will be ready there to go. Obviously, you have to fill in the details, but you'll have a framework. You won't be starting from a white sheet of paper. Our colleagues. So it's really important that our internal workforce have the communications necessary to support our customers and also remain aware of what was going on in the evolving situation. Of course, what happens in crisis is people hear something, and they think, "Ooh, goodness, I wonder if I'm supposed to tell someone about that." And if you're actively communicating, really, really proactively pushing information out, you can help stem some of the influx of inquiries or engagement that you might otherwise get. All right. Our ecosystem. So in this circumstance, this was primarily all of our banking partners, so communicating to impacted suppliers, their parties to assess the impact and implement contingency plans as we might have needed. So I do think effective communication is going to enable all of the other work you need to do to get done efficiently -- as efficiently as possible. It's really, really critical in a crisis. All right. Engaging with our ecosystem was current enough, right? So part of managing crisis is balancing what needs to get done today on the specific crisis issue that's happening right now and then looking ahead to what today's crisis issue will turn into tomorrow or next week. So that's where reaching out to our ecosystem early, so there's vendors, third parties and suppliers, allowed us to begin iterating on what was going to come next in the coming days and weeks, right? And then last, of course but no means least, our customers. So in a crisis, you want to be thinking about who your key impacted stakeholders are and ensuring you're available to them. This is part of why the overcommunication is so important. It gives you space to be available. And in this case, it was to our customers, space to be available to who needs you. And by no means is this list exhaustive. But we do want to share with you a bit about operational crisis management approach. We do invest a lot of time and resources in minimizing the risk through continuity planning. And it pays off in a crisis. So whilst it's top of mind right now, we've just been through something, think about what it is for you. Obviously, a smaller business is going to have an approach that makes sense for your size. But we all have customers. We all have stakeholders. And thinking ahead and are planning for at least a framework that you can activate in a crisis is worthwhile.

So Samantha, I think, as you already said earlier, the SVB banking event was particularly unique for us because we have customers that bank with SVB and also Signature that were looking for us to get their people paid. So I think what we'd like to do is sort of speak through now what we were doing as a response to the actual banking crisis. So can you give us some of the specifics on TriNet's response to the banking relationship and to our banking relationship during this time?

Yes, yes, absolutely. So TriNet's banking is diversified. We distribute banking operations and payroll funds for our PEO business and our HCM business across several large financial institutions, including several global systemically important banks. We actively monitor the health of our banking partners. And we do not permit concentrations in any single bank for these operations. Now that makes sense for TriNet, right? We process a very large amount of payroll every year for customers. So it makes perfect sense that we're really focused on ensuring that our banking relationships are diversified and are in systemically important banks. How I might think about that as a small business is really what Alex was referring to earlier, right? It's not necessarily reasonable or realistic to think that a small business is going to have four different bank accounts and maintaining deposits in all of those bank accounts with sufficient amounts to cover payroll. But one of the things that you could do is what Alex was referencing earlier, this idea of having a second bank account with a second line of credit attached to it. One of the things that we do see in small businesses is if you're banking with a small bank or even if you're banking with a large bank, it's quite likely that you have a single relationship. It's quite likely that whatever line of credit you may have is from the same bank that's holding your deposits. And whilst that may make sense from a relationship standpoint, it does mean that you haven't diversified your risk. So I would really encourage people at a minimum to think about what a separate line of credit and a separate account might need for their business.

Can I jump in there, Samantha? Because I actually think that was one of the things that came up is from the moment in time when the bank was closed, all funding mechanisms and all mechanisms to get access to payroll funding were gone. So we had no way to interact because there was nobody there to interact with. And I think that's something to think about. We were calling customers and getting them to shift to manual wires. But they would have to set up a second account to manually wire money to us because we didn't know what was going to happen to the bank. And now that went on for 2 days. And I know our customers were extremely stressed as well as your employees and their worksite employees were stressed about how we could get access to this money. So I do think that second bank account, it should be top of mind. Having a second relationship would have sped this process up for many people. And we'll speak more about that. But I think it's important, just one of the learnings we got from that is this actual idea that when the bank was closed, we had no way to see where the money was or even get access to it.

Yes. All right. So then moving into the next piece, which is coordinating with banking partnerships, this is communication. I spoke on the previous slide about our continuity plan and the idea that we engage early with TriNet ecosystem partners. And if one of those banking partners were to fail, we would continue to have access to substantial cash reserves. That's really what Alex -- the corollary for a small business is what Alex was just talking about, right, that second bank account with access to a line of credit, right? Our priority in this situation though would be to avoid any disruption to our customers. So with TriNet, it's really about ensuring that people get paid, our customers are disrupted as little as possible. So we evaluate the impact of any bank failure on our in-process client and WSE payments and work with the failed bank or other banking partners to transfer funds and reroute accounts just to continue to support our customers and WSEs. There is an example with First Republic Bank, for instance. So as soon as the Silicon Valley Bank event began, we were coordinating directly with First Republic, who is a great banking partner to TriNet. We work very closely with them. We think very highly of that organization. But at the beginning of that crisis, we started coordinating directly with First Republic to ensure that all of the communication lines were open to ensure that we understood their position and we knew that we had access to the corporate people inside of that bank in the event that we needed it. First Republic Bank has been a great partner for TriNet and for our customers. We continue to work with them. We root for their success. But we also maintain contingencies for continuity with all of our banking relationships. And that's just really important for you and your business to ensure that you get through something like this. I do think another piece is a major way we harness our scale on behalf of small- and medium-sized businesses across the country. And this isn't something that a small business is necessarily going to do, although I have some ideas as to how you might. It's by leveraging our scale with lawmakers. So a major concern of our customers was the fact that the FDIC had specifically stated that deposits would not be protected beyond insured amounts. So that's obviously at odds with what has historically occurred with respect to bank failures. And faith in our banking system is dependent upon people having faith in the safety of their deposits. So we engage directly with lawmakers, with industry groups to ensure that the U.S. Department of Treasury, the FDIC and other banking regulators as well as senior White House officials were aware of the issues facing small businesses and the need to prioritize payroll payments so that people can get paid, so that mortgages can get paid, so that car loans can get paid, so that school fees can get paid. The payroll element was just so, so important in this crisis. We also engage directly with members of Congress, who advocated on behalf of our customers. And it's worth noting that there was significant state action in some states that occurred, with some states looking at creating rescue plans if it was needed to -- to fund payroll in an emergency fashion. Now as a small business, you're not necessarily going to be -- you don't necessarily have your own lobbyist and whatnot. But you absolutely know who your member of Congress is, you know who your senator is. And I promise you, they are interested in small business in times of crisis. So if there is a crisis that's affecting you, I would just have a note in your crisis management plan that says, "E-mail, tweet, TikTok," whatever it is that you do in your business, "at your Congress member and at your states and at your senator." Because they are interested in small businesses. And they do want to know how these things are affecting small business.

Yes. And Samantha, I think it's a really good call-out. We know 100% starting in COVID, small-, medium-sized businesses are definitely looked at by both their state and federal legislators. Take the time to figure out who they are. They're engaged with us as a company because we are part of the small- and medium-sized business community as a trusted adviser. So they look to us to try to consolidate your thoughts. But there was absolutely an opportunity for you to speak up as it relates to how the beginning of this crisis was handled compared to what happened at the end. So it is good to hear. Because every time you tell me about what your team is doing in Washington on behalf of TriNet and our customers reminds me of what harnessing the power of scale really means. And I thank you for going through that banking deep-dive. I do want to add an additional reminder that TriNet is accredited by the Employer Services Assurance Corporation, ESAC, which would guarantee -- in a relationship between us that just guarantees and gives us and our customers some assurances that their payroll and our ability to fund our payrolls is looked at. So now let's sort of go into sort of how you should be looking at this from a high level, getting outside of just the event. And I think you must always be thinking about the same thing I've always talked about since you've seen me on these, which is access to liquidity. Small businesses, medium-sized businesses, liquidity is the most important thing. And you really have to be thinking about that. I know all of you do. And I suspect all of you do. But the events of last month remind us just how huge an issue access to liquidity is. It took 2 days for SVB to be taken over. And during those 2 days, there was a lot of noise about what was going to happen, an advice out there as what was going on. It started to look like a cascading event. And there's a lot of people talking but very little happening. And the reality is the best thing you can do is to establish a financial -- to establish a financial layer or financial protection is to diversify. And diversification looks different for everyone and will come with an additional administrative effort. And so as we've always said in major crises like this, we're here to help you take control and navigate through these uncertain times. And you protecting your business and your employees will require an additional effort with respect to liquidity. And so there is going to be work. We're here to help you do it. But you've got to do it. And having at least a second banking partner can offer a peace of mind and greater security. For example, TriNet distributes its fund across several large financial institutions to mitigate against the risk of only having one bank or if a one bank fails. Samantha has already said, regional banks are often providing superior service in crisis to start-up companies and small- and medium-sized businesses. And while TriNet, we do believe in the power of regional banks for small- and medium-sized businesses, it would be remiss of me not to tell you that SMB should monitor the news regarding and as well as the health of their banking partners and consider diversifying a portion of their funds with larger institutions, such as global systemically important banks.

And Alex, I'm going to stop you there. Because I mentioned that term earlier and you've just said it again. I do want to take a moment and just talk about what that is because I don't want to assume that everyone knows. It's a category of banks that's determined by the Financial Stability Board, which is seen as part of the architecture of global economic governance. The Board of the FSB includes the G20 and the European Commission. And these banks are determined based on size, cross-jurisdiction activity, complexity and substitutability. And most importantly, under relevant U.S. laws, they're required to maintain a higher capital level than other banks.

So thank you. Because we'd like to throw out all these terms. But it's important for people to understand for sure what they are. It would be prudent for you to stay on top of events as it relates to your banking relationships. One way to do that is to set up sort of Google Alerts or another mechanism like that to follow any news related to your banking partners so that you can receive these alerts as they're happening.

Yes, the Google Alert is a really great idea, whatever mechanism you use, whether it's Google or whatever the mechanism is that you use to get your news. I think it's your banking partners. I also think it's your third-party vendors. It's those key suppliers that sit in your ecosystem that potentially represent risk to your business. So if you're staying on top of what's going on with those suppliers, that's always going to put you in better stead than if you weren't sure what happened, then you sort of woke up 3 days later and said, "Oh, my goodness, what happened there?" So you can see the slide -- on the slide there, we've got a reference to the FDIC press releases, the things that would probably pop up if your bank was being engaged with by the FDIC. So that's going to be something that you'd look at in terms of liquidity concerns. So if not already, this is the second tick box there, I do think you're going to want to become familiar with FDIC protections and understand whether and how your funds are protected. So your banking partners are going to be happy to talk with you. Your bank, call them, ask, speak to your accounting and legal advisers. Not all deposits are FDIC-insured to $250,000. We do have some pre-submitted questions on FDIC insurance that we'll get to at the end. But find out whether your deposits are FDIC-protected and consider whether splitting your deposits that it protects you. Cash investment accounts are generally not FDIC-insured. But you might own the securities that your brokerage invests. And you might be able to recover them if your brokerage fails. So find out whether or not your brokerage has SIPC, that's Securities Investor Protection Corporation coverage. And that can provide up to $500,000 in coverage if your securities cannot be recovered, including up to $250,000 coverage for brokerage cash. So these are the sorts of considerations that you should be thinking about as you think through your access to liquidity, particularly in a time of crisis. And the results of those things are going to become part of your business continuity plan. Because knowing what's insured and what isn't is going to help you make better decisions as you're working through a crisis. So the last thing I do want to touch on is your payroll obligations. As an employer, your access to liquidity is really closely tied to your employee payroll obligations. And this is higher on your list than any vendor relationship you may have. And I want to spend some time talking about why. You prioritized payroll like your personal life depends on it as a business owner because it might, or at least your freedom. Wages are considered so important that the law in many states provides for a variety of civil and criminal penalties in the event that an employer fails to pay wages timely. So the consequences of not paying wages on time, they can include a variety of fines, monetary penalties, damages. And the damage is going to add up. Because the consequences are triggered on a per person per payroll, or in some instances, per day basis. And additionally, the civil and criminal penalties can be personal in some instances, meaning that owners, executives, board members can be personally liable, which can result in jail time in a worst-case scenario. It could also mean that leaders are forced to pay penalties out of their own pockets if the employer doesn't have the money to do so, so very important. And it's due to the vital importance of wages to employees who work for those wages, right? So many employees are living paycheck-to-paycheck. And even if they're not, they're dependent upon their salary for their mortgage, for their car payment, we talked about school fees earlier. And any failure to pay wages could impact their ability to pay rent and mortgage or meet their own financial obligations. So that's why it's so important. In the recent events, we advised that employers shouldn't count on any excuses that wage payment -- that the bank's failures might create with respect to wage payment violations. At the time now, there's no indication that wage payment laws at the federal, state or local level will be interpreted to recognize these sorts of failures as a reason to not paying wages on time. And funding payroll on time is going to ensure that several other issues don't arise, right? It's got to be a good corporate citizen, it relates to the continuation of benefits, continuation of workers' compensation, ensuring that the rest of the economy continues to run. So as employer, you need to do whatever is possible to ensure the payment of earned wages. There are a few additional items that you can think through as an employer, things like stopping work if you can't pay for it, being mindful of pitfalls when cutting pay. We actually have an article up on our microsite, so I won't sort of go through all of them now. But there is an article up on our microsite that walks through all of the different sort of options that you might want to think through in the event that you're in a circumstance where you actually can't pay wages, you haven't got the liquidity that's necessary.

Yes. And I appreciate that. I think it's really good information, it's important to keep top of mind as an employer. As a reminder, what Samantha just said is that on our TriNet customer resource center liquidity considerations microsite, there are all of the information that TriNet clients have access to. And of course, we're here to help navigate through any of these, so don't hesitate to contact us on this. I do think this concept of the responsibility to make sure you're making payroll also should come into decisions that you make as it relates to the vendors you do business with. Because not being able to make payroll has risk to you. So keep that top of mind and think about, as you have a continuity plan, think about how do you evaluate the vendors you do business with in circumstances like this. If you're not client of ours, sit and take that through your continuity plan to make sure you're thinking about who can, who can't and what do they do in circumstances like this. So now that we've covered this sort of thinking through the liquidity specifics, let's move a little bit higher up and start to think about how we think about continuity planning as a whole. Your efforts in building a solid business continuity plan will directly impact your ability to navigate any unforeseen crisis. It enables you to activate the right resource at the right time to achieve your stated objections -- or objectives. Think through it as you're building your plan and think through these various pieces. But I do want to make sure you understand, there's no perfection to this. As we've already said, we had a plan that we continue to change as time goes on. The framework, I think, is the biggest key, trying to figure out what is it about the framework as a whole that seems to work across multiple situations. And as each one of those goes, the framework seems to be the best piece of advice I can give you as a small- and medium-sized business. We create frameworks and then we can move people in the boxes. But those frameworks alone help us respond very quickly to crisis. One of the things to think about is standing up dedicated teams or resources of people. But you may not be able to know who they are at any given point in time. But again, having a framework to understand, what does that mean in my business? And who are these people? As we've already said, internal and external communication is really important. I think for us as well as for you, what you really should keep top of mind is the active communication can bog you down and slow you down. So having a framework, as Samantha said earlier, potentially having holding statements or things that are already pre-written that you can get out there or mechanisms to communicate internally and externally, will absolutely help you continue making the decisions and doing the work.

And Alex, I just want to jump in there. Because when people say pre-written, I don't mean sort of you're going to pre-write a statement that's going to work for every crisis. That's not what I mean at all. Rather, what I mean is you're going to have a framework that you use for the purposes of the communication that says, "We're aware that the thing happened. Here's what we're doing about the thing. Here's how it might impact you. Here's what we need you to do if you have an issue," right? That might be as simple as your framework can be. Because you can't fill in any more than that. But it's really useful in a crisis to know, "This is my framework. This is the order in which I'm going to deal with things." You can change it if you need to. Like if you get in a crisis, and as it turns out, it's not the right thing, that's fine. But at least you're not staring at a white piece of paper trying to work out what to write.

Yes. And I think that's right. It's how you do it and then you can interchange as you go. You've got to look at the financial impacts and the obligations to the business, what your customer impacts are, what are ecosystem impacts, vendors, third party, supply chain, et cetera, what your employee impacts are, internal employee impacts and then operational impacts, data centers, critical infrastructure, downtime allowances and then I think legal and regulatory impacts. And I think that's a great framework to think to. And the key to the document and the key is to document your plan. I'm sorry, I'm the one saying this. This is why it's so strange that I'm saying this. Because usually, it's Samantha saying, "Document, document, document." So clearly, they put something on my plate. At TriNet, we annually refresh our continuity plan. We have a continuity plan, which is an opportunity for us to pressure-test our current plan and make updates where necessary. There's no hard rules here. But having rigor around your continuity plan and testing will benefit your business. I can't stress enough about business partnerships and how important they are in times of crisis. Sharing your business continuity plan with all of your business stakeholders only improves the outcomes in the next crisis as it arrives. Having a discussion now about how you and your ecosystem will approach crisis situations will allow you to be prepared as you can be really seeing around the corner as the next crisis arrives. And I want to sort of reiterate how important that is. Your partners just went through something, the people you know, people in your ecosystem, trusted advisers, could just be people in some of your networking groups. Being able to communicate, how did you deal with this? How can I use you to help me with this? They probably have ideas of people they can contact. And I think it's really important to test yourself in these circumstances. Because look, in the last 4 years, we've had no shortage of crises that have happened. And actually being very quick to respond, what would have taken us 4 weeks 2 years ago took us 3 days this year. And that's really how you think about how quickly we can operationalize by thinking and looking and talking to our -- the folks we do business with.

Just to be clear, it wouldn't have taken us 4 weeks 2 years ago.

I understand. But I am -- it would have happened in either way. But these things happen very quickly. And I think having a framework absolutely helps and talking to other people is the easiest way to get better.

And I think one of the things -- I know I've said this a lot in this call, but I'm going to keep reiterating it. Because I do think that sometimes a small business, if you've got 20 people or 10 people or 5 people, you might look at things like this and say, "That's for a big company." And there's certainly versions of business continuity planning where the business continuity plan that exists for a global Fortune 100 is not the business continuity plan that you're going to have in a 5-person company. However, it is still really important to be thinking about sort of your weakest link if you like, right? So what are your or key priorities? When I say weakest link, I don't necessarily mean that as a negative. And I know it sound negative. I mean it as one of the bits in your business that would break, right, that would actually break your business, an inability to pay payroll, right? That's why the liquidity is so key, right? It's important to pay vendors. It's important for growth. It's important for all of these things. But really, when you're talking about sort of the immediacy of a crisis and a time period, for a business owner, paying payroll is one of your key things, right? So protecting that ability, that's like your first order that you need to do. And then you can move into sort of whatever the next order is, right? At the very beginning, I was talking about this idea of moving into your ecosystem. Like what are the second order effects going to be? Where am I going to be next week, right? So if you think about what your weakest link is and understand that, right, so what are your critical business considerations when navigating a crisis? Generally speaking, thinking about legal and regulatory guide rails is actually a really good place to start. So if you're going to have really regulated business, you're going to want to think about what can't fail in terms of your compliance with those regulations, right? We're all heavily regulated as employers. And payroll is one of the things that can't fail. So think about what are the implications if it does fail. And this is a great example at TriNet, right? At TriNet, we -- for payroll to fail to run would be devastating for our customers and our business. So it is one of our #1 things that we protect and prioritize. You will have similar things in your business that are core to what your business is. You don't need to plan for everything. But think about what those core things are, right, that core thing that's going to really have an impact to your business. Only you are going to know what those items are for your business. But it's really essential that you understand what they are and have a plan for substitution or to mitigate in the impact of some sort of unforeseen event. I do think that inflation is going to continue to put stress on the financial system. And it's important for all of you to keep access to liquidity and business continuity top of mind. So by building and documenting and testing your continuity plan, like engaging early with your ecosystem and understanding the most critical business functions and their implications, that's going to set you up and your business up to weather the next unforeseen crisis that we encounter. And we're always here to help you take control and support you through your efforts. All right. With that...

Before you jump on, I do want to translate some of what we're talking about to small business. One of the -- so to start these types of continuity programs for the 5-person or the 10-person customer, one of the real pieces that I think is an area you can think about is, at the very beginning of the banking crisis, when this happened, the response of the federal government was different than what they did at the very beginning of COVID. And so one of the ways you can start to jot down thinking through these areas that will break can just be asking questions such as what would happen if the federal government did this? What happens if they don't do that? Because it's very easy to make an assumption that whatever the government will do in that moment, it may be different. And that will get you to start asking those deeper questions of, "Okay, now I see where the break is. If the government did this, I don't have a break." But if it doesn't do that, that then tells you to build a continuity plan around that decision. And I think that will help you then start figuring out what's the next thing to think about. Technology, wherever your business is, actually think about what are the outcomes that drive it. And that will help you write your continuity plan.

That's an excellent idea. Thank you. All right. I'm going to move us on because I do want to make sure we get through all of the questions. All right. So these are questions that came in ahead of time.

First one for you, Alex. How should we evaluate bank stability? Do you have any suggestions to how to manage cash accounts to balance the need to stay under $250,000 and potentially having to open and manage lots of accounts? So any tips on financial control to help manage lots of accounts?

Yes. What we're saying in a lot today, diversification is key, maintaining multiple accounts, so in the event of crisis, you can move funds and payroll rapidly between accounts. For those of you with payrolls above $250,000, there may not be an easy answer here. You only need to balance administrative efforts that it takes to manage multiple accounts versus the risk of keeping balances above $250,000. As far as stability evaluation goes, reading through your bank's financial disclosures will shed light on their financial health.

Yes. So thank you. And I'm going to take people back actually. I think we said it twice now, but I want to say it again. If you run a line of credit -- having a line of credit isn't bad, right? It doesn't mean that you can't afford to pay your debts as and when they pull you. It doesn't mean that you don't think you're going to get your next funding round. It just means that you're set up for a situation where you have an unexpected absence of liquidity event. So don't -- back in the old days before the last financial crisis, I think it was seen as a negative to pull on the line of credit or pull a line of credit. I think it's seen as prudent financial management now, so...

Yes. And I'll add to that. For those of you that are sort of thinking about how would you do that if you're a customers of ours in the resource center, we've used our scale to leverage relationships with large banks that we can set up and give you access to, not just for you but also for your employees. Go check it out. We've got some connections we're utilizing to help you. If the decision here is, "I don't know where to go to get a second account," we can help you with that as well.

Yes. That was one of the ecosystem pieces that we leveraged over that weekend. All right. Alex, do you have thoughts on the stability of different financial institutions, a regional bank versus a large bank versus a credit union?

I'm not sure major derivative exposure is particularly relevant for large money center banks under the purview of the Fed. The major banks are subject to regulatory stress-testing that measures their health. And again, reviewing their financials is always a good bet. The reason why small businesses tend to go to regional banks is they offer services more specific and attentive to SMB customers than a large bank would. There's value in maintaining small- and medium-sized -- or for you as a small- and medium-sized business to keep those types of relationships with your regional bank. But as always, diligence and diversification should always be kept top of mind.

Yes. I'm going to guess you're going to ask me this one.

Okay. What regulations will be coming out? Or what are you expecting to see out of this crisis for small- and medium-sized businesses?

I mean, I could have asked you that, but -- so we do know the White House has discussed imposing higher capital requirements, mandating new plans for orderly dissolution in the event of a crisis and requiring more frequent stress tests to assess banks' financial health. As of now, Congress is still in fact-finding mode. That's evidenced by the first set of hearings this week with banking regulators, the Fed, the FDIC and Treasury. In the coming weeks, lawmakers are looking to have additional hearings with Silicon Valley Bank executives in particular, and potentially additional regulators, like the San Francisco Fed. There is not a consistent viewpoint at the moment on whether additional legislation is needed. Although lawmakers have discussed options to increase mandatory supervision, increased deposit insurance levels and to call back executive pay for bank execs if wrongdoing is found. In terms of new legislation that impacts small- and medium-sized businesses, it really is too early to tell. There is some active lobbying going on with respect to that issue around payroll and criminality that's attached to late payroll, when that occurs through no fault of the sort of the business owner. But I'm not sure that I'd be waiting on that or expecting that to go anywhere, frankly. Payroll is one of those things that is always prioritized by lawmakers. We do expect regulators to increase their work and analysis to prevent additional bank runs that we saw with SVB. And we do know that lawmakers are in constant communication with their local community and regional banks to ensure that an early warning system is set up, should there be additional issues. I promise you, your local congressperson, your senator is interested in this. So if you have a view and you want to engage, I promise you, they're interested in hearing from a small business owner on this.

Okay, next question. And I've got to tell you, you're doing a great job of ignoring your dog. Okay. It is -- we all live real time, that's the way this works. Okay, so next question is, is it a misconception that the FDIC can take up to 99 years to pay insured deposits when a bank fails?

It is. That is a misconception. In fact, it's such a misconception that the FDIC have an FAQ on their website. So the FDIC does occasionally receive calls from depositors. It comes from consumers who attended some sort of financial seminar or something and heard that the FDIC can take up to 99 years to pay the depositors insured deposits after a bank gets closed. That claim is false, without merit. The truth is that federal requires the FDIC to pay deposit insurance as soon as possible. For insured deposits that flows within the deposit insurance limits, the FDIC almost always pays insured depositors within a few business days of a closing. That's usually the next business day. And payment is made either by providing each depositor a new account at another insured institution or by issuing it direct to each depositor. The limited exceptions that might take longer to process are deposits that exceed $250,000 or that are linked to trust documents, accounts that are established by third-party brokers on behalf of other individuals. And that delay is really a function of the time that it takes the depositor or their broker to provide missing supplemental information. So it's a miss, not correct.

Okay. What is the next question? Let me see. Okay. Please clarify that an individual account for the husband, the wife and a joint account are all covered under the FDIC for the maximum of $250,000.

All right. So individuals can qualify for more than $250,000 in coverage at one insured bank or savings association if they own deposit accounts in different ownership categories. So the most common account ownership category for an individual and family deposits are single accounts, joint accounts, revocable trust accounts and then certain retirement accounts. But basic coverage limits include a single account. Now that's owned by one person with no beneficiaries. It's going to have $250,000 per owner. Joint accounts, which is 2 or more persons with no beneficiaries, that's $250,000 per co-owner. And so in this question, assuming all FDIC requirements are met and the individual account for the husband, the single account, and the individual account for the wife, single account, and the joint account are within one institution. The husband would have up to $250,000 of his single account deposits covered and up to $250,000 for all his joint accounts. The wife would have up to $250,000 of her single account deposits covered and up to $250,000 for all of her joint accounts.

Okay. So the last one we got was how can startups continue to get funding in this environment?

Yes. So this is -- this came up before the call, but it's being asked by customers often frankly just before the crisis even occurred, just given the general macroeconomic environment. I think it's not that funding has dried up. It's more that it's more scarce. Now maybe that's the same thing if you're someone who's looking for funding. But it's going to take you back to basics, right? So who is your customer? How will you make money? How will you grow? And I think now, more than ever, be proactive with your investors and share information with them, share progress on your KPIs, share information on your growth, whatever it is that tells the story of your company, proactive communication, overcommunicate on your actions and execution. You want no surprises at all for your investors. Engage with the long tail of potential investors and create that dialogue so that if or when additional capital is needed for your business, you're not starting from scratch. And then just stay focused on your core objectives, right? You talk about this often, Alex, like what's your why? So stay focused on your core objectives, operate lean, stay away from corner cases, right, solving problems with corner cases. If capital is at a premium, demonstrate to our investors that you recognize this and that you are a great steward of their capital. So again, communication, overcommunicate.

Okay. I think we are done with questions. So we have -- we want to go through now. So visit the TriNet customer resource center liquidity consideration site on the TriNet platform for our customers. Keep up to date on the blogs or webinars or any of the banks that are coming up at trinet.com. If there are questions that have come out of this that we didn't answer or things that you want us to speak to or any ideas whatsoever on what you want us to talk about next, you can always contact me at [email protected]. If you've noticed so far, we have yet to create a Samantha Wellington e-mail address. So it's [email protected]. Very much appreciate the time you've taken to be here. Hopefully, we've given you at least some ideas around the framework around continuity planning, how to think through it. And we always welcome the conversation. You can always contact me. I'm always available to speak. Don't forget to take the survey at the end. We really like the information we get from this. It helps inform us as to what we're going to do to offer you. And as always, I'd like to say the act of what we're doing today and how we help our customers is just who we are. And I appreciate you as customers and don't ever hesitate to contact us. So thanks again, and appreciate you taking the time.

Thank you.