Institutions with the most concentrated exposures, insufficient capital cushions, and limited lifelines from larger institutions or regulators face significant losses.

The damage could metastasize into a full-blown financial crisis if scores or even hundreds of small- and midsize commercial banks fail simultaneously. A worst-case scenario might include contagion to other economies and banking deserts across the U.S.

As the Federal Reserve keeps interest rates elevated and CRE risks worsen with falling property values, businesses will continue to experience restrictive financing conditions. Executives can nonetheless take steps to potentially mitigate the fallout — including examining banking relationships, extending debt maturities, and securing adequate working capital.