What implications do corporate failures have on your business environment?

Answer 1

I guess it depends on whether you mean the effects on your own business if a customer or supplier fails or in the wider sense, how it affects countries as a whole. In the case of the former, if the customer is a major one , the danger is that your company may be ruined by unpaid accounts. the best way to avoid this of course is to never become overly dependant on one or two customers for the majority of your turnover. Don't be tempted by that big order without keeping a regular check on the financial standing of the customer. Make sure there is no slippage in payment terms, just give the minimum credit terms you can both live with and don't extend it or you will be financing the other guys business. Keep an eye on supplier's as well to see that they have no problems in the wings or you could end up without vital materials or services if they suddenly go broke.

For a country, corporate failure rates from the largest organisation down to the guy with a corner shop matter because if the rate of failure starts to climb, this is an indication of serious problems in the business economy and also in the wider economy, perhaps as a result of rising unemployment or investment cutbacks. A Government with its finger on the pulse can react to this situation with financial incentives to aid viable businesses thorough the promotion of responsible bank lending on affordable terms. Other measures can also be taken but it depends on the general state of the economy in that particular country.