Business Risk

Spring 2009, Recession a global reality

Rows of container ships tied up in dock give a stark indication slowdown in global demand. Over-capacity has lead to a major scaling back of production and a drop in demand for a range of commodities. Oil prices have levelled out at around $45 bbl, meaning two out of three new E&P projects would fail to breakeven on current costs. The global recession is here to stay for the foreseeable future.

Meeting the challenge of change

Managing a business through a recession requires a constant focus on the key contributors to bottom line profit and cash generation. Forecasting sales demand becomes critical as the business capacity and output need to match this demand. A comprehensive review of the business is needed to ensure proper use of all available assets and resources. Operating expenses need to be reduced in line with reduced capacity.

The continuing support of Banks and other financial backers needs to be maintained. Companies must demonstrate that they have not only a viable business but that this is underpinned with a robust financial strategy. Operations need to be lean but also well controlled to prevent risks such as fraud and loss. Cashflow must be monitored as a priority and actions taken to fully recover receivables within terms.

Working in partnership

We understand that the decisions made by managers in the coming months will have a profound effect on the longterm success of the business. Our independent review and advisory services will help companies make the right decisions.

Whilst companies cannot control the global conditions, they can protect themselves against risks that will contribute to many corporate failures. We review the effectiveness of the internal controls framework and risk mangement systems.