| Poor management found to be one of the highest business continuity risk factors Inadequate management is the most important factor contributing to business failures according to a new study analysing the underlying internal and external causes of business distress in the United States. The survey of 1900 executives, aimed at appraising historic internal and external causes for business failure in today's environment, was conducted by Seton Hall University's Stillman School of Business, South Orange, NJ, and Buccino & Associates, Inc., a national turnaround, workout and crisis management consulting firm headquartered in New York City. Eighty-seven percent of those that responded to the survey said that businesses fail because of internal issues, such as excessive debt, improper planning and failure to change, as opposed to external factors. By contrast, more than 88 percent of the respondents felt that the impact of 9/11 and subsequent terrorist acts will have only a small or fair impact on business failures over the next few years and that recent accounting irregularities will have a minimal impact. Gerald P. Buccino, chairman and CEO of Buccino & Associates, Inc., said, "Internal factors are solely management decisions. Management must stay on top of matters such as the amount of debt accruing, the strategic direction of a company, conducting due diligence on accounting and other control systems. In an era of heightened focus on management, the board of directors and corporate governance issues, these findings suggest that the board has ultimate responsibility if it permits the same management to oversee a continuing decline in profitability and cash flows. Warning signs appear one to three years before a business fails and paying close attention to management strategies, business plans, controls and monthly financial results can give the board information to act quickly." In other major findings, an increase of business failures over the next five years was expected by 77 percent of the respondents. More than 80 percent believed that recent loan losses by banks will tighten credit markets and increase business failures over the next five years. 76 percent predicted that foreign competition will also contribute to business failures over the same period. Additional internal causes ranked by respondents for business failures were inadequate accounting and management information, inadequate internal control systems and over-expansion. Other external factors were ranked as technological changes, social changes and government constraints.
•Date:
25th June 2003 •North America •Type:
Article •Topic: BC
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