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.

Looking at Comptus we can see that it really doesn’t relate to the book as they have no contingency plan for a long recession. This gives us some creative leeway as we can help them make one. Looking back at best practices 7 and the summary which is provided to us the steps which I would put into a contingency plan for Comptus would be capital spending, employment, and inventories. With capital spending they need to keep their capital spending at a minimum this is achievable for them as they keep their company fairly centralized and don’t have unnecessary equipment or many buildings. For extended recessions as producer company they need to be prepared to shut down most of their equipment and purchase no new equipment as in times of extended downturn most likely demand of there manufactured goods will be very low and they will most likely not even be breaking even. Their plan for employment is already set, Comptus keeps very few employees so they are already lean enough for a moderate downturn and in an extended one they want to at least keep the bare minimum they will need once the economy has recovered. As for inventory as a manufacturing company inventory is very important as it is how you keep track of your businesses products. In preparing for a moderate downturn Comptus should try to keep spare parts in the case they no longer are able to sustain production due to lack of business but always keep enough in your current inventory which you plan on selling currently for the market. In an extended downturn it depends if you no longer have the funds to produce you may have to live off of the inventory you have saved and built up if yoy still can produce try to make us much as you can afford until you have to rely on the stored parts again.

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.