The vunerability assessment

Analyze the data for your client company’s industry and answer the following questions.

  1. How much have sales in the industry declined in the recession? What’s the worst that has happened in the past?

    • In 2008 in the beginning of the recession the growth rate was -.6%. In 2007 before the recession the growth rate was 1.4%. The industry was heavily impacted in the middle of the recession. In 2008 the growth rate was -11.6%. Lastly, the company came back up and in 2009 the growth rate increased above 0 to .4%

  2. 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?

    • In the beginning of the recession the company was staying afloat. In early 2008 the growth rate was steady at .6%. Although as the recession continued the company declined, then towards the middle it came back up. In 2009 around when the recession ended Comptus came but up above 0.

  3. Does the industry recover from recession before, at the same time, or after the national economy? Again, what’s the difference in months?

    • The company did recover at the same time as the economy did. In 2008 the company was at -11.6% grow rate in the middle of the recession. In early 2009 it started to go back up with a growth rate of -11.1%. At the end of the recession in 2009 the growth rate was above 0 at .4%.

  4. How long does the industry typically take to recover from a recession?

    • The industry did not take too long to recover. In 2010 they had a peak at 7.1%. Then it decreased and I believe went back on track as usual. It continued to increase and slowly decrease at times, depending on the economy.

Grappone

Bank of New Hampshire

Comptus

Building flexibility into the business

Read the client’s response to the questionnaire. How can your client build flexibility into the business? Refer back to the textbook, if necessary.

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. 

Bank of New Hampshire

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.

Comptus

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 company is not affected too much since their company is lightly staffed. They can turn to in house production whenever there is a threat.
 Our staffing is very light, and we utilize outsourcing when we are busy. In a downturn we can return to in house production.