Analyze the data for your client company’s industry and answer the following questions.
How much have sales in the industry declined in the recession? What’s the worst that has happened in the past?
Does the industry go into recession before, at the same time, or after the national economy goes into recession? If earlier or later, how many months of difference is there?
Does the industry recover from recession before, at the same time, or after the national economy? Again, what’s the difference in months?
How long does the industry typically take to recover from a recession?
Question to the businesses Recessions raise the risk of bankruptcy. Even less severe downturns can limit the company’s growth prospects for several years.
How does your company plan for a downturn?
| Business | Response from Business |
|---|---|
| Graponne | Our liquidity is a major focus when we are preparing for a downturn as well as our inventory levels. Cash is king in terms of getting through a downturn. You also need great relationships with your lenders – you hope they will stick with you when times get tough. |
| Bank of New Hampshire | The bank builds up loss reserves, conducts expense reviews, tries to maximize yield on assets, looks to sell less profitable assets, e.g. low yielding loans. The bank also conducts various annual stress tests and scenario analyses to identify potential problems that could arise during an adverse economic event. Corrective action is taken to mitigate these risks if the exposure is outside of acceptable ranges. |
| Comptus | Our staffing is very light, and we utilize outsourcing when we are busy. In a downturn we can return to in house production. |
| GDS Link | As economic indicators suggest an approaching recession, our company implements a multi-faceted strategy to navigate potential challenges. In the short term, we focus on financial stability through enhanced expense control and cash flow monitoring. This includes implementing a hiring freeze for new and replacement positions, reducing non-essential travel, and intensifying efforts to collect monthly license fees from clients. While staffing reductions remain a possibility, they have historically been rare in our organization. Our medium-term strategy centers on optimizing our staffing blend. We leverage a combination of U.S. and Philippines-based resources, acknowledging the significant cost differential. When U.S.-based positions become vacant, we require strong justification for rehiring within the U.S., giving preference to replacing roles with offshore resources where feasible. This approach contributes to overall cost reduction while maintaining operational efficiency. For the long term, we align our product offerings with evolving market needs during economic cycles. During periods of growth or early stages of a downturn, we focus on promoting our systems for approving new borrowers in consumer loans, capitalizing on the growth potential in this segment. As economic conditions worsen, we shift emphasis to our collections tools, which assist in automating and prioritizing the collection process for delinquent borrowers. We continuously enhance and expand these products to meet the changing demands of current and prospective clients throughout different economic phases. This adaptive strategy ensures that we remain responsive to our clients’ needs while positioning ourselves for sustained success across various economic conditions. |