Evaluate your client company’s contingency plan

Read your client company’s response, see whether it is consistent with lessons we learned in chapter seven and whether you can improve it by applying this week’s lessons. Elaborate at least in 200 words and cite the lessons from the Best Practices 7 assignment.

Business response to the questionnaire

Graponne

Question Response from the company
Please, discuss your contingency plan for dealing with recession, if you have one.

Our contingency plan include:

  1. Tighter control of our inventory levels
  2. Managing our cash. Making sure we have enough liquid reserves to get us through the downturn
  3. Limiting discretionary expenses. Including delaying intensive capital type projects.
  4. Keeping our team members fully engaged
  5. Making sure we have available credit (to finance cars that are not selling as well as lines to draw down for working capital). 

Bank of New Hampshire

Question Response from the company
Please, discuss your contingency plan for dealing with recession, if you have one. As previously mentioned, we build loan loss reserves and carefully monitor for signs of economic stress that may impact our business. We have sources of emergency liquidity available, and other similar tools to ensure the viability of the bank through a very severe downturn. Furthermore, we stress test our loan portfolios and entire balance sheet to determine how the bank would perform in various economic scenarios. This allows us to determine is additional reserves, liquidity, etc. are needed.

I believe Bank of New Hampshire has a very solid plan for the scenario where an economic downturn takes place. Their steps to combat a recession are very similar to the steps that we read about in chapter 7. In the book, it mentioned cutting down on accounts receivable. As a recession hits, it is important to have as little money as possible on credit from your customers. In the Bank of New Hampshire’s contingency plan, they build up their loan loss reserves. Doing so helps to cover the risk of your customer not being able to pay back their loan during a downturn. It is also very smart that in their plan, they talk about how they stress test their portfolios and balance sheet to see how the company would be effected in different scenarios. Although testing for different scenarios is a good idea, you can never truly know how severe a recession can be beforehand. You may test for what you think is the worst possible outcome, but the recession could hit and the impact could be ten times worse than you could have imagined. I believe Bank of New Hampshire is on the right path with their contingency plan, however I believe they should add a step that mentions their plans of cutting costs or managing their employment levels.

Comptus

Question Response from the company
Please, discuss your contingency plan for dealing with recession, if you have one. We do not have a contingency plan for an extended recession.