William C. Blasses discusses how to identify, assess, and mitigate the risks of working with a distressed business.
The term “contagion” was common during the 2008 financial crisis. This term referred to the prospect of banks, with otherwise strong balance sheets, failing due to the failure of companies with which they conducted business. Although the global economy has since recovered, these risks remain and are applicable to businesses across all industries, not only the financial sector.
For many businesses, a customer that ceases operations or files for bankruptcy results in an uncollectible receivable. While this can be painful by itself, the situation becomes further exacerbated when trustee takes over the customer and attempts to recover payments made before the customer closed its doors. Though the payments could have been otherwise appropriate, the mere timing of the payments could allow them to be clawed back.
Likewise, a supplier that closes its doors can be difficult to replace. Many industries, such as automotive production, have such tight supply chains and lack of true replacement options that supplier replacement takes months to accomplish and there are significant costs.
While these types of disruptions may not be fatal to a business, they can be significantly painful. Identification, assessment and mitigation of the risks are therefore important to limit the impact of these disruptions.
The entire Corp! Magazine article by William Blasses, can be found HERE on page seven.
William Blasses focuses his practice on finding pragmatic solutions to issues that may affect the viability and continued operations of a business, such as shareholder, vendor, and customer disputes, liquidity shortfalls, and debt maturity.
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