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? Bank of New Hampshire was actually behind when it comes the the decline during the recession. The economy dropped faster and further than Bank of New Hampshire did during the 2008 recession. Bank of New Hampshire had their biggest drop in 2012 during the 2nd quarter. They lost about 2% in total growth.
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? Bank of New Hampshire went into a recession a little bit later than the national economy. Bank of New Hampshire seemed to be about 9 months behind the national economy when it comes to being affected by the recession. We see their numbers drop in the 4th quarter of 2008 until the deepest point which was the 3rd quarter in 2009.
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 was lagging behind the national economy when it came to their recovery time from the recession. It took Bank of New Hampshire about 6 months from their deepest point in the recession before they met up again with the national economy.
How long does the industry typically take to recover from a recession? Well, based on the graphs at hand. We can see that it took Bank of New Hampshire about a year before they were back into the positive growth from the recession. Looking at all the other lows during Bank of New Hampshire’s history, it seems that once they go negative in growth they catch back up within a years time.
Read the client’s response to the questionnaire. How can your client build flexibility into the business? Refer back to the textbook, if necessary. They should first off start by having some sort of plan ahead of time, so that when a recession does hit they know what needs to get done. One thing I believe that Bank of New Hampshire could add to help them during a recession is more automation systems, these could get put in place during downturns so if they need to let off anybody they can. Based off of Bank of New Hampshires response to the question , it does seem that they at least have an idea as to what they need to do during a downtime.
| 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. |