Your Bank Relationships Are a Concentration Risk You Are Not Pricing

Treasury teams obsess over counterparty risk on the investment portfolio and then quietly keep 80% of operating cash at two banks. The 2023 regional bank failures should have ended this practice. For most mid-market companies, they did not.

The reason is friction, not ignorance. Opening, funding, and maintaining a bank relationship is genuinely painful. KYC takes months. Integrating a new bank into your TMS or ERP is a project, not a task. So the path of least resistance is to consolidate, and consolidation is sold to you by your relationship banker as a feature.

It is not a feature. It is a concentration risk that does not show up in any of your standard reports.

The honest framework is straightforward.

No single bank should hold more than 40% of operating cash. If yours does, you have a single point of failure that can stop payroll for a week. That is not a theoretical exposure. It happened to real companies in March 2023, and the ones that recovered fastest were the ones with a pre-existing secondary relationship they could surge into.

The secondary relationship has to be live. A dormant account at a second bank is not redundancy. It is paperwork. The account needs real flows, real users, and real integration. Otherwise you will not be able to use it in the 48 hours when you actually need it.

Price the optionality, do not hope for it. A second banking relationship costs real money in fees and treasury time. Put that number in the budget and stop pretending it is free. It is cheaper than the alternative by an order of magnitude.

Your auditors will not flag this. Your board will not ask about it until the day they ask about it in a tone you will not enjoy. Get ahead of it now.