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? Sales in the industry declined during the last recession around -2.3% from the beginning to the end of the recession. This is alarming but what is a better indicator of the true decline seen during the recession was during the 2008 recession when sales went from growing at a rate of 1.5% in 2007.3 (before the recession) to -1.4% in 2009.3 (during the recession). This goes to show you that sales do decline during a recession but, it can be seen that the decline is relatively low compared to the effect in other industries.
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? The Financial service industry goes into a recession after the national economy goes into a recession. This can be seen while interpreting the graphs because the peak decline in growth for the national economy occurred on 2008.4. While the peak decline in growth for bank of New Hampshire’s industry occurred on 2009.3. This is almost a year after the recession started improving for the national economy.
Does the industry recover from recession before, at the same time, or after the national economy? Again, what’s the difference in months? Bank of New Hampshire’s Industry recovers from the recession after the national economy. The national economy can be seen returning back to a state of growth in 2009.25. This is actually still during the recession. Which at this time the industry can still be seen declining at a rate of about -1%. This goes to show you that Bank of New Hampshire’s industry recovers after the national economy since the industry is still in decline while the national economy is growing. Bank Of New Hampshire’s industry cannot be see growing until the start of 2010 just less than half a year after the national economy had already started growing again.
How long does the industry typically take to recover from a recession? Bank of New Hampshire’s industry typically takes 1.8 years to recover from a recession. ## Grappone
Read the client’s response to the questionnaire. How can your client build flexibility into the business? Refer back to the textbook, if necessary.
My client must improve flexibility by improving relationships with customers. By implementing this into our company we will be improving our knowledge on our customers. Allowing us during bad times to be more aware of which customers are worth keeping and which are worth losing during bad times. This may include rewarding customers for paying loans off on time or for spending money. This will then allow us to track which customers are the most profitable. In a way you are using good times to create a report on each of your customers. So that when bad times occur you have the ability to look at the past and determine more wisely whether your company can offer them the same services at a different risk level. In the long run this effort will help Bank of New Hampshire get the valuable data they need to get through declining economic times in Bank of New Hampshire’s industry. ## Graponne
| Question | Response from the company |
|---|---|
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? |
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. |
| Question | Response from the company |
|---|---|
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? |
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. |
| Question | Response from the company |
|---|---|
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? |
Our staffing is very light, and we utilize outsourcing when we are busy. In a downturn we can return to in house production. |