TOOL 1.1
BUSINESS/OPERATIONAL
| Business | • Change in the nature of the business • Loss of important product lines, franchises, distribution rights, sources of supply • Loss of a major client or contract • Problems at major suppliers • Substantial single/repeat order that will strain production capacity/working capital • Major downward shift in price of products • Major upward shift in price of key inputs (raw materials, components, utilities) or availability problems • Consumption changes in major markets • Price war • Loss of key personnel • Major acquisition/divestment • Significant increase in or change in nature of competition • New legislation/regulations • Tax/fiscal changes • Change in economic conditions (growth/recession, exchange rates, interest rates) • Claims on warranties/guarantees/service agreements • Product quality problems • Legal action being taken by or against client • Competitors/peers in problems • Sector specific issues (e.g. oil prices for airlines, textile import restrictions) • Negative press/media reports • Rumours • Changes in technology affecting either manufacturing or products • Collapse/rapid change in share price |
| Factory/premises | • Inefficient layout of machinery/equipment • Poor maintenance of machinery/equipment • Machinery/equipment is out of date and technologically redundant • Deferred replacement of outdated machinery/equipment • Sales or sale and leaseback of production equipment • Increasing downtime • Low staff morale/labour disputes |
| Working Capital | • Evidence of lengthening credit terms to clients • Increasing inability to collect receivables • Discounts given are larger, more frequent • Speculative inventory purchases • Evidence of stale inventory, large inventory levels or wrong mix of inventory • Suppliers demanding quicker payment or cash before delivery • Suppliers demanding Letters of Credit/Guarantees |
| Management | • Changes of senior management (especially if unexpected) • Lack of strategic plan • Frequent strategy changes • One man show • Lack of succession • Complex corporate structure • Arrogant behaviour towards funders, creditors, media • Unwillingness to provide information • Lack of openness/honesty • “Trophies” – new head offices, expensive sponsorships, ownership of sports teams etc. • Poor labour relations • Lack of experience mix • Remuneration/lifestyle |
