How we served our customers and managed performance through COVID-19

Candid reflections on the challenges we’ve faced navigating the COVID-19 crisis, and some important lessons learned.

While we are still very much feeling the social and economic impacts of COVID on our business and community, we wanted to take a moment to pause and reflect on where we are today, and where we need to be tomorrow. Since Brex’s creation three years ago, our clearly-defined mission and values have laddered up into two main goals: 1) To be the financial operating system of American startups and SMBs, and 2) To support our customers by providing them the infrastructure to realize their full potential. We exist to serve our customers. And as we grow, we balance our own financial stability with our ability to be there for them. While in ‘peacetime’ it’s relatively easy to maintain this balance, 2020 has continually proven that during ‘wartime,’ when growth doesn’t come easily, it becomes increasingly more difficult.

Below I hope to address some of the decisions and processes we have applied to strike this balance. And I’ll discuss how we’ve been applying first principles to navigate our hardest period as growing company that we have faced to date.

Lesson #1 Always take a moment to pause for our customers

When the global pandemic hit, we knew we were going to have to make changes — and fast. Despite an immense sense of urgency to act quickly, it was apparent that we needed to first take a moment of pause to listen to our customers and employees on the front line. This exercise of listening helped us understand how companies were experiencing business interruptions, and which locations, companies, and industries were getting hit the hardest.

This exercise of listening helped us understand how companies were experiencing business interruptions, and which locations, companies, and industries were getting hit the hardest.

To our surprise, for many of our customers the actual impact was very different from the macro story the market was telling. For example, some customers that had ordered inventory from China found their supply was surprisingly uninterrupted. They had planned for shutdowns around Chinese New Year and because the country began coming out of lockdown faster than other locations such as Italy or the UK, supply was largely unaffected. Additionally, some customers with WFH solutions, food delivery, or medical services, were seeing huge revenue growth, and needed more capital to expand. On the other hand, customers with even secondary exposure to retail and discretionary goods needed extra support. Many had to put their payments on hold as they assessed the situation and made distribution and product pivots, such as activewear to face masks, or cafe-packaged coffee to D2C ground beans.

In response to our customers’ varying needs, we tried to get creative. Instead of focusing on immediate repayment, we took a long-term and customer-centric approach to make sure these businesses were supported and set up for success. We worked directly with customers’ founders and finance teams to determine what their repayment capacity looked like, and where they were most exposed. For example, did they have supply chain issues that would be solved in time, or more systemic business issues that required strategic adjustments? Through these conversations, we were able to construct schedules and balances that would enable Brex to feel comfortable extending credit. At the same time, we empowered our customers to operate and borrow responsibly in a really challenging environment. This approach not only worked for our customers, it also worked for Brex. Our customers adhered to the agreed-upon repayment schedules, and these customers are now beginning to see a positive revenue trajectory while continuing to spend with Brex to operate their businesses.

Lesson #2 Treat our lenders like our customers

Building trust with our customers has always been our primary focus. But the past five months have also taught us the importance of building and maintaining that same relationship with our own lenders. Decreased business spending and new business creation, coupled with an increase in payment extensions and delinquencies, posed a very real risk during the COVID crisis. While negatively impacting our own credit performance metrics and jeopardizing access to funding, these trends and outcomes would, in turn, impact our ability to serve our customers. Like oxygen masks on an airplane, we needed to make sure our own systems were safely secured in order to better help others.

Like oxygen masks on an airplane, we needed to make sure our own systems were safely secured in order to better help others.

To do this, we applied the following rules: 1) There is no such thing as over-communication, we always need to expect that our lenders are assuming the worst, and prove to them that we have a strong handle on the strategy and financials; 2) Growth is not valued the way it was, so a dollar goes a lot further today than it did a year ago; 3) Be humble, flexible, and listen, because nobody has all the right answers at the moment. Applying these rules, we provided our lenders with weekly updates on our performance. We included a standard and thorough presentation of our portfolio, and held weekly calls with our lenders to discuss financial and operational updates. Providing lenders with the results of our actions, and being transparent with the challenges we faced, helped to build credibility for our company and its leadership.

We also adjusted the way Brex borrowed. When creating new types of repayment programs, we ensured that we did so in accordance with our lenders’ risk tolerance. We were able to do this thanks to a big balance sheet and proactive fundraising, which, of course, isn’t always an option. We were lucky to have a strong cash position during this unexpected time, but we had also prepared well by being conservative with our use of cash and credit while growing Brex. This is not to say that we didn’t also have to make difficult decisions but we were relieved to see that our years of planning and financial discipline, coupled with our unique credit model based on real-time data, has set us up to be able to continue serving our customers.

Lesson #3 We won’t always be right

We certainly weren’t always right. As mentioned above, at the beginning of the pandemic we, like many others, saw the potential risk for businesses with supply chains that had a heavy dependence on China. We included these customers in groups for limit reductions, but didn’t include companies with European exposure. This was a tough decision, as it meant reducing limits for businesses that relied on Brex. But we needed to make sure that we took appropriate risk management steps for Brex, as well. That said, as the data emerged, we realized our initial predictions were incorrect. China was soon unexpectedly back online, while Europe and other parts of the US were still in full and increasing lockdown. Fortunately, we were able to adjust again, and align our risk settings with the evolving global economic environment. Moving fast to make changes worked well for Brex, because we did so both in adding and removing new adjustments to our credit policies. But we also learned some valuable lessons along the way.

Lesson #4 It’s important to know when to build, partner, and borrow — especially when you’re resource constrained

After listening to and addressing our customers’ — and our company’s — immediate needs, we looked internally to identify the weaknesses that the shift in economic conditions may have exposed. If we didn’t, we knew from previous rollout experience that it would ultimately translate into manual work, human error, and burnout of our team.

To do this, we asked ourselves: Which operating teams at Brex might pose the greatest challenge to delivering solutions at scale? Had we previously underinvested in tools or operational systems that would eventually break? Could we improve monitoring capabilities to enable faster risk detection and problem solving?

With these questions in mind, we worked across the business to prioritize projects that would have the most immediate impact for our existing teams. And we identified the places where impact would endure long term. This meant accelerating upgrades to internal tools and communication platforms, building out new data visibility tools specific to servicing and collections’ needs, and adding more automation to our existing operations platform. The result enabled us to scale faster than we could grow headcount, while accelerating projects that added automation to data feeds and supported our underwriting system. This alone saved our operations team several hours each day, and ultimately this real-time data advantage now differentiates Brex from our peers. And while we’re proud of this accomplishment, it’s our ability to use these systems to continue serving our customers that really keeps us moving forward.

Beyond creating short-term payment solutions, supporting our customers this year also meant helping them survive a recession. As a non-bank, it wasn’t initially clear whether Brex would be able to provide our customers with direct access to the U.S. Federal Government’s Paycheck Protection Program (PPP). This had the potential to be a real downside for Brex customers when compared to big banks, and a miss for our business. In the interest of providing the best service for our customers, we worked to get our customers access to PPP loans through qualified bank partners and distributors, while continuing to execute on our own business plan. If we couldn’t be the ones to solve our customers’ problems, we would find them the person who could.

If we couldn’t be the ones to solve our customers’ problems, we would find them the person who could.

Core company values and a first principle approaches are the tried-and-true way to tackle new business problems or moments of crisis

As we look back today, we learned a number of very valuable operational lessons through the onset of the COVID crisis. First, having strong internal communication and being able to work together as fixers is critical. Every single department was involved in Brex’s response to COVID, and we wouldn’t have ended in a strong position today without teams making compromises on behalf of our customers. Second, we mobilized early to create a coordinated plan. Our initial understanding of where we might see cracks, challenges, or potential issues of scale enabled us to make investments in operational tools with the data, product, and engineering teams in March. By the time the new challenges of April, May, and June arrived, we were prepared. Finally, we made sure that we were always seeking truth when it came to solving our customers’ problems. And if we couldn’t solve them directly, we’d find them someone who could.

One of the great things about being a startup is the ability to look at an old problem through a new lens.

As we grow, Brex has an opportunity to reinforce these lessons while planning for both positive and negative scenarios. One of the great things about being a startup is the ability to look at an old problem through a new lens. Our reaction to COVID was defined by acting quickly, staying focused, and seeking truth in our evaluation of the environment and potential solutions. COVID challenged our teams to think creatively and remain focused on helping our customers grow, no matter the situation. Through it all, we were able to exit the beginning of our first recession with credit performance at the top end of the industry. And we did it while directly helping many of our customers manage this incredibly difficult time. While we’re proud of our response, we know there is a long road ahead of us as a company. We hope to continue learning through each new obstacle we face, so we can grow as a company and help our customers do the same. Staying true to our mission and core values has enabled us to put our best foot forward and help our customers dream big — today, tomorrow, and every day beyond.

Thanks for reading,

Erica, Camilla, and Mira

This article was co-authored by:

Erica Dorfman is VP Treasury & Capital Markets at Brex. Prior to Brex, she worked on Wall Street. She holds a degree in Economics from Columbia University.

Camilla Morais is VP Operations and Finance at Brex. She previously led finances at Kraft Heinz, and has a mechanical aeronautics engineering degree from ITA.

Mira Srinivasan is VP Risk at Brex. She previously led risk at Amex & corporate finance at McKinsey. She has an MBA from Symbiosis Center for Management & HRD.