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.

Grappone includes some key steps in its contingency plan. Chapter 7 shared the importance of monitoring inventories and reducing unnecessary inventory items which Grappone included in their plan. Grappone mentioned managing their cash so they have enough to survive the downturn. There are many specific ways to raise cash, and cut costs. Ways you can do this that Grappone did not include is to slow hiring, sell account receivables, secure a larger credit line, and get long term debt. One way to cut costs that Grappone did include was limiting discretionary expenses including delaying intensive capital-type projects. Re-evaluating capital spending can help to cut costs if you’re expecting a downturn. If you are in a recession you may have to completely cut capital spending entirely and start selling assets. Grappone included making sure they have accessible credit to finance cars that may not be selling. Financing is important when it comes to a contingency plan; if expecting a downturn you should secure a larger credit line, delay payments to vendors, and get long-term debt. Keeping a good relationship with banks by disclosing the company’s condition early and fully can be helping during a recession. If you can get your business on a good financial footing, you can take advantage of recessions rather than suffer. As a business, you can identify these opportunities by looking at your cash and ability to finance a purchase or capital spending. Then a business should identify market segments they want to improve or make larger after the recovery after the recession begins. This will give you the opportunity to take advantage of your competitors while they are suffering by gaining talented workers and acquiring former customers who have left the market. You can also use this as an opportunity to re-negotiate long-term contracts with vendors.

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.

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.