Are we on the brink of a new recession? If this is the case, is your company ready?
Nieuwegein, February 2019
Most companies in the Netherlands and EU have been benefiting from a positive economic climate for the last couple of years. The number of bankruptcies has been declining severely and the unemployment rates are at an all-time low since the beginning of this millennium.
The picture above clearly shows that trend in number of bankruptcies has been downward since 2014. During the last few months however, more and more signals point in the direction that the economy is cooling down or even worse, moving towards a recession. Suddenly, critical economic times are more realistic. Important factors for a worsening economic outlook are a.o. the insecurities surrounding the Brexit, the global trade conflicts and the pessimistic expectations of entrepreneurs around the globe, which was the take-away from the World Economic Forum in Swiss Davos recently. The moment that the most important ‘alarm bell’ for a recession (the reversed interest curve – when the interest on short-term government bonds is higher than the interest on long-term government bonds) sounds, a recession seems inevitable. In short, these are all signals that point towards the possibility that we are on the brink of a new recession.
Based on above mentioned facts, in combination with the ‘economic law’ of the last 40 years that during the start of a new decade, a spike in the number of bankruptcies always erupts, we dare to confirm that a new recession is lurking.
Our opinion is that companies, also the ones with positive results, should look inwards to check if they are ready for a worsening economic climate. To asses this objectively, we have created an online instrument, the Beaufort 360° Yield Compass (NL: Rendement Kompas), where companies can be tested in a short time-period. Boards, directors and management teams are provided with an online survey consisting of approximately 200 questions divided over 11 dimensions, varying from Strategy & Finance to Management & Organisation to provide a clear image of the organisation.
We think it is important that companies repeatedly check their current position, especially when a shift in economic climate is to be expected. Awareness is of the utmost importance. Only when that has occurred will it be possible to take the appropriate steps to move through poor economic circumstances.
Many companies have been showing positive results during the last couple of years. This begs the question however, if this is the result of strategic, organisational and financial solid management, or that one has just been piggybacking the positive economic climate.
Regardless of the fact that a company has positive results today, it can still happen that the company is in the financial danger zone. Oftentimes, this is not clearly seen by current management or board members. Problems are only acknowledged at the moment that losses occur, or worse, when there is an immediate liquidity shortage.
Our message to directors is therefore: Scan your company in a timely matter. It is always wiser to fix the roof when the sun is shining. Prevention is always the best medicine.
For more information regarding the Beaufort 360° Yield Compass, you can contact Jan Janssen.
(email: [email protected] phone: +31 6 55 13 70 53)
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