Triple AAA Rating - are you sure?

Every business transaction contains an element of risk, yet at the same time how satisfactory are the mechanics for managing risk? There is a certain irony in respect of the latest pronouncements from the various Ratings Agencies. Bear in mind they added fuel to the fire during the boom years now they say dig deeper holes in the downturn. Pity they didn’t keep their own counsel.

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner measures of business were abandoned. An analysis of recent disasters from the subprime fiasco in the US through to the Eurozone crisis via the Greek Debt debacle all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

A forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked. Better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rd Party appointed to do it for you 

The value of mutually dependent relationships

Over the past months we have been bombarded from all sides with negative input.

However one of the benefits emerging from this difficult business climate is the long term value that can be placed on a mutually beneficial Customer/ Supplier relationship.

As increasing numbers of business operate on a just in time inventory basis it is vital that a good understanding exists between Supplier and Consumer.

In as much as a Supplier will be prepared to go the extra mile to ensure that his Buyer receives his goods on time and in good order so it behoves a Buyer to ensure that he pays as required and is not abusing the goodwill of his Supplier by “pinching” some extra period of credit.

If both parties work together in a professional and commercial manner then it will strengthen the relationship and both will emerge from the current difficult situation with a renewed confidence in each other and a better based business for the long term.

Multichannel marketing

The retail sector is facing particular challenges at present with the survival of many outlets resting upon the results of their Christmas trading.

Yesterdays results from the music and electronics retailer HMV graphically illustrates the problems facing this sector, a reported loss of £45.7 million and the share price now 90% lower than a year ago.

Much talk in recent times has focussed on the demise of the traditional British High St. There is a tendency to feel that all would be well if instead of the plethora of Charity shops, Discount Retailers and Pay Day Loan outlets they were to be replaced by Butchers, Bakers & Candlestick Makers.

In reality there is no going back to this perceived “Golden Age”. The new buzz word in retailing is "multichannel", loosely defined as a strategy that involves selling through stores, websites, mobile phones, catalogues, social networking sites, et cetera. Basically it is an all encompassing process designed to maximise sales revenues.

Not all business models can embrace this system but there has rarely been a time when the old adage of “work smarter” has been more relevant. As more and more obstacles are thrown up to threaten operating margins everyone in any commercial organisation must ensure that they are operating at optimum efficiency.

Whilst many Retailers are pinning their hopes on “multi channelling”, they are not the only sector having to radically re-think strategy in these turbulent times.

The inability to adapt to the requirements of the changing market place will inevitably see many companies joining the long list of corporate failures in the months ahead.  

Something any business can control

External factors over which little control can be exerted continue to buffet all business sectors. However, every organisation does have a potentially winning weapon in their armoury namely the opportunity to offer excellent customer service.

In these difficult times everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

It is a paradox that as trading conditions become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

From the frustrations of automated answering (devised surely to test anyone’s patience to the ultimate degree) to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

Little wonder that they choose to vote with their feet.

Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued, not just “one of a number” or even worse a nuisance.

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

Commercial post mortem – now we can see the problem!

All too often in the course of commercial post mortems, the Management and Shareholders of troubled organisations end up asking “how did that go wrong?”

It is an incontrovertible fact that many companies fail to address problem issues early enough to avoid an oncoming crisis. When in reality the causes of the problems were all too readily visible.

In the past days we have seen classic examples of this ostrich school of management. The IT support Group Logica whose CEO cited overestimating the amount of work it would receive resulting in a 3^rd Profit warning which now see the shares price worth half of what it was a year ago and Thomas Cook Travel Group who posted a £398m loss after taking a hit on the plunging value of its assets and brands.

The signs of a troubled business are all too apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc

Instead of grasping these nettles, often the preferred option is to engage in a variety of exercises ranging from ill judged acquisitions (think RBS/ABN), totally pointless projects such as rebranding or the launch of another product range destined to fail for the above reasons.

Inevitably the harsh realities come into play but for many companies it is at that stage too late in the day.

Battening down the hatches

We are shortly to enter the holiday season during which time we will find ourselves in somewhat of a limbo situation. At the same time the current financial inputs underscore the fact that the UK economy remains in a very fragile condition

Without question, the real effects of the cut-backs and general downturn in many people’s incomes will be felt most keenly in the first quarter of 2012.

The recent hike in utility charges ( up 22% in a year) will really bite from January onwards and a further downturn in consumer confidence appears likely. More and more will the mantra “heating versus eating” be heard.

Running any business against this background will provide challenges and there could not be a more pressing time to address the question of operating costs and the rigorous policing of stocks and Debtors.

If appropriate actions are taken now, companies should find themselves well positioned to ride out the inevitable storms.

Positioning for 2012

Do you want to maximise your profits whilst avoiding locking your company into increased overheads?

Then it appears that the time is right for a root and branch analysis of your business.

As an independent Consultant I can give your business a full evaluation and provide you with a range of successful sales strategies and cost saving efficiencies.

Why not check out my profile at http://uk.linkedin.com/in/gordonblackburn

The man at the Clapham Supermarket – a modern Everyman

One of the tests of the English legal system is “what would the man on the Clapham omnibus think?”- basically this is the reaction to any problem or situation that could be expected from a reasonably educated and intelligent but non-specialist person.

In the current economic climate many companies would do well to ask “what does the man at the Clapham Supermarket checkout think?”

The problem is that many people running businesses (or for that matter senior politicians) are too removed from the realities of life to effectively understand the economic difficulties faced by the ordinary consumer. It is a very easy exercise but a few minutes spent in the supermarket or on a garage forecourt will give a true insight into the problems and frustrations currently felt by the ordinary consumer.

Retail businesses have a matter of days left to maximise their sales in the pre Christmas run-up and the end of year sales. It does not take a crystal ball to forecast bad results for many retailers against this current backdrop with the resulting trickle down through other areas of the economy.

There is unfortunately no silver bullet so all businesses must look to operate at maximum efficiency and with rigorous policing of inventory levels and cash-flow.

Failure to spot a crisis – FSA for short

Today’s report into the failure of the Royal Bank of Scotland in 2008 will highlight amongst many issues the fact that the UK’s Financial Service Authority (FSA) really did not understand the complexities of the business which it was in the position to regulate.

The spectacular failure of RBS ( a cost to the UK taxpayer of some £45 billion in the bail out) can be attributed to a number of factors not least the total ineptitude and recklessness of the senior management as typified by Sir Fred Goodwin.

This is an outstanding example of a business out of control. At the same time it begs the question how many businesses are similarly basket cases yet by smoke and mirrors are able to befuddle and confuse both their shareholders and bankers.

For example as the owner of an SME are you really confident in the integrity of the figures presented to you by your finance department? Or as the shareholders of RBS are you merely content to receive good news without challenging the how and whys of these results being achieved?

It all boils down to the age old fact that if something looks too good to be true it usually is.     

Survival – the name of the game

Some years ago whilst working for an international corporation I attended one of the bi-annual strategic reviews for senior Group executives. Each executive was required to give a presentation in respect of his/her business unit. One colleague addressed the audience with his one word objective namely “survival”.

At the time this was met with a fairly frosty response but current events show that it is probably a suitable watchword for the present time. As the machinations continue in the Euro zone and the commentaries become even more emotional with phrases such as “disintegration” and “meltdown” then to survive these times would seem to be a very laudable objective.

So many factors are coming into play over which individual companies can do little to protect their interests other than ensure that they react appropriately.

However the one certainty is that the global economies will survive and business will continue. In the coming months there will undoubtedly be casualties but by adopting a controlled and rational response to these challenges businesses can ride out these difficult times.

The value of building and maintaining relationships

Business practises have changed markedly in recent years.

Although many operations are completed electronically in this virtual world we should never forget that essentially commerce is about people trading together.

The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot  be achieved solely via a computer terminal.

It makes sound economic sense to foster and maintain good customer relationships as it has been determined that it costs up to five times as much to win a new customer as it does to retain one.

There is an old adage “know your customer,” this dictate has never been more important than in these uncertain and challenging times.

Time to grasp the nettle

Every business transaction contains an element of risk, yet at the same time how satisfactory are the mechanics for managing risk?

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner measures of business were abandoned. An analysis of recent disasters all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

There has never been a more pressing need to examine all areas of exposure.

A forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked.

Better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rd Party appointed to do it for you 

Failing to act, acting to fail

Very few companies implode like a supernova. All too often the distress signals are visible for some time before the flame out.

When faced with mounting problems it is highly likely that the solutions will of necessity be painful. However, radical and decisive surgery is often the only way to ensure a patient’s survival.

Many companies adopt the Mr Micawber attitude that “something will turn up”. In the overwhelming majority of such cases the only people likely to turn up are the administrators/liquidators.

Be it merely inertia or fear of addressing the problem issues the outcome will inevitably remain the same.

Low cost entry to the UK market

One of the most valuable commodities available to any organisation is local knowledge put simply the way of getting things done.

How many times has a venture be it commercial or for that matter military, ended badly owing to a basic failure to understand and deal with local market conditions?

The UK is a mature and sophisticated market and though offering different challenges to operating in emerging economies there are still obstacles in trying to establish a presence.

Operating overheads present a crucial challenge and this is where we can assist you to achieve a cost-effective solution to marketing your products in the UK.

Take a look at our website www.glbconsulting.co.uk

 Or check out our video link http://youtu.be/ruUtQnlJ

If it wasn't so serious we could all laugh

Yesterday the Governor of the Bank of England issued another doom laden forecast warning of the "extraordinarily serious and threatening" economic situation.

He joins a growing band of Doomsayers made up of high profile members of the international Banking world and senior politicians who seem oblivious to the fact that the problems we now face were created on “their watch”.

It is the ultimate irony that politicians with the so called “light touch” and institutions such as the Bank of England/ US Fed were all too willing not to look too closely into the ways that the markets and sovereign economies were being structured for fear of rocking the boat.

There is a certain black humour that these very architects of disaster now turn round and pontificate about the dangers that the world faces.

These were the same people who were lauding and applauding the likes of Sir Fred Goodwin the former boss of RBS. There was further irony that his successor at  Royal Bank of Scotland, the bank now majority-owned by the UK government, said recently that strict regulation meant investors saw UK banks as a "dumb" place to invest, and that it limited banks' ability to lend.

As the crisis in the Euro zone unfolds it is also worth noting the number of high profile cheer leaders for the Euro who are now conspicuous by their silence on the matter.

The reality is the man in the street is told to prepare for more belt tightening whilst businesses find themselves desperate for funding as Banks are reluctant lenders as they look to repair their damaged balance sheets.

Plus ça change.

The consequences of denial

For reasons well documented over the past days the UK economy is in a very fragile situation. Despite all the signals many businesses still seem unwilling or unable to face facts.

A classic example is the retail sector – the run up to Christmas, October through to December the so called “golden quarter” has always been of prime importance.

As 2011 unfolded it was evident that consumers would be faced with tough decisions and the traditional Christmas buying spree would not materialise. Now that this is proving to be so we are seeing a number of leading retailers who are in denial.

Various reasons are being cited to explain the lack of sales such as the unusually warm autumn weather, but the more pertinent fact is simply many UK consumers do not have buying capacity.

It was obvious that faced with rising fuel and utility bills, a squeeze on income and a higher than anticipated inflation rate that something would have to give.

Retailers in particular should forget their theories and notions as to what people ought to be doing and consider what they are doing.

Once a business is oriented to face facts rather than delusions, problems tend to fall into their true perspective and become soluble.

Know when to hold – know when to fold

In business as in poker there are times when discretion is the better part of valour.

Put simply, some of the best business deals are those you turn away.

All organisations operating in today’s climate need to have constant and rigorous focus on their commercial exposure.

Against the current competitive background it is obviously difficult to contemplate turning away business especially from a customer of long standing.

However an objective assessment may well lead to the conclusion that in this instance the business would be left to others.

It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.

The reward for such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line whilst allowing focus to be placed on more profitable activities.

KYC- know your customer

KYC - know your customer.

In the US this basically refers to a due diligence process undertaken by Banks and financial institutions to combat fraud, identity theft and general scams.

It is however a mantra that most organisations would do well to adopt.

Rapid advances in technology continue to transform the way we do business. Everyday business tools would have been regarded as flights of fancy not so long ago.With the unstoppable rise of e-commerce come challenges.

One of the biggest dangers is the lack of personal contact between a company and its customers.Obviously this is not an issue for online retaillers selling product over the net and being paid via a Debit card or Pay Pal etc.

However the is an increasing trend for B2B ales to be concluded by email and even SMS.With the loss of the personal contact the identity and customer relationship suffers.The surest way to avoid problems is by knowing your customer and understanding their business.

This realtionship and mutual understanding cannot be acheived via a key pad and electronic ordering system.

Do you want to jump start your business?

Pressures on the business sector continue to mount and this is especially true for those running SME’s.

The need to achieve operating efficiencies has never been more acute. This is a time when a fresh appraisal of your business could return significant dividends.

As an independent business consultant I am confident that I can assist you to ride out these difficult times and build a strong base from which to expand.

Why not drop me an email at gordon.blackburn1@btinternet.com or alternatively check out my video link which will give an insight into my experience:

http://www.youtube.com/watch?v=qvIHWrB5BWI

‘tis the season to be – focussed

In recent times there has been the tendency for the Christmas holiday season to stretch out over a number of weeks and therefore with just over a month to go to Christmas it would seem an appropriate time to consider the implications for business.

Without doubt of biggest concern to SME’s will be the impact on cash-flow. Many companies are operating very close to the edge and any delays in payment could have serious consequences.

In some instances invoices which fall due for payment after the 16^th December could well not be settled until the 3^rd January – giving an at worse scenario of 3 weeks delayed payment.

It would therefore seem prudent to look at your last half December receivables and make a realistic forecast of just how much cash will “come in”.

Similarly with “just in time” inventory it would be sensible to ensure that sufficient stock will be on hand for the early days of January when there will be inevitable disruptions to the supply chain.

Trying to get things done in the UK during the latter half of December will undoubtedly prove to be a challenging task so it would be best to ensure you are positioned accordingly. 

As always, the usual suspects - fear and greed

Currently with all the talk of gloom and doom in the financial markets, fear is the overriding factor with a sense of panic gripping many operators as witnessed by the sell-off in Thomas Cook stock Tuesday which saw the share price plummet by nearly 80%.

Politicians seem to be hell bent on outdoing each other as to who can send out the direst warnings.

Now is the time to remain focussed and consider the implications for your business.

Just as was evidenced during the credit crunch crisis in the summer of 2008 there is a question mark over the manner in which the Banks will respond to the current inputs.

The problem for the Banks is that because of the legacies of their previous mistakes they are effectively stifling their customers businesses as they look to batten down the hatches and strengthen their own balance sheets.

It will become increasingly difficult to gain support from the Banks in the coming months therefore it must be the absolute priority to keep a strict rein on your finances – make sure that your Debtors Book is strictly controlled and ensure that Stock turn and inventory levels are well policed.

With their houses far from in order, the Banks will undoubtedly become increasingly conservative in their approach to lending, so the order of the day is work within your current limits and maximise your profits.

The ostrich school of management

How often do we see that by ignoring obvious problems the Management and Shareholders of troubled organisations subsequently end up asking “why did that go wrong?”

It is simple, a large number of companies fail to address problem issues early enough to avoid an oncoming crisis.

The signs of a troubled business are all too apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc

Instead of grasping these nettles, often the preferred option is to engage in a totally pointless exercise such as a rebranding exercise or the launch of another product range destined to fail for the above reasons.

The operating style of such companies can be likened to the exercise of rearranging deckchairs on the “Titanic”

Timewasters? – the bane of a Consultant’s life

The life of a Consultant is certainly not without its frustrations but undoubtedly the most irksome is the prevalence of the timewaster.

A typical scenario - contact is made by a company who wishes to engage the services of a Consultant to address the problems within their organisation.

The Consultant spends time studying the brief and formulating a strategy for tackling these problem issues.

At the end of this initial process (often involving a series of meetings) it appears that its all systems go - then the Client goes cold - the timewaster has reared his head again.

It is an all too familiar story - the troubled company appreciates it has problem areas but when faced with the implications of an objective assessment it is all too easy to duck the issue and try to muddle through.

The downside for the troubled company is this fudging of the issue will in most cases signal the slide into administration and or liquidation.

The clock is ticking down

Starting with the US Thanksgiving holiday this week we are entering the holiday season and as businesses start gearing down a general sense of drift will be the norm.

The signs are that the first quarter of 2012 will be a difficult time for business as Consumers further reign in their spending.

 Without doubt now is the time to tackle potential problem areas with some effective reviews.

How much inventory are you carrying? - rather than face a “fire sale” early in the New Year it may well be opportune to lighten up now with some innovative marketing strategies.

How is your cash position?- with the ominous backdrop surrounding financial institutions and Governments alike, don’t expect the Banks to readily provide additional finance- it is an absolute priority to maintain positive cash-flow and this can only be achieved by keeping Debtors under control.

Undoubtedly, the casualty rate will climb as we move into the early months of 2012 – make sure that your Company doesn’t become part of these statistics

Be on your guard

As the economic downturn continues to bite all businesses and organisations must remain alert to the potential for fraud.

Entrepreneurial owners of SME’s are a prime target for fraud as overseeing finances doesn’t always come naturally to them. If a founder is focusing mainly on the product or service being sold, and only minimally on administration, it leaves a business vulnerable to fraud.

It is vital to have systems in place to monitor all the company’s finances in a clear and concise format. After all it is never comfortable experience to find that someone is holding your wallet.

It is not only independent businesses that are vulnerable. UK Councils have been conned out of more than £7m by criminals using information put on their own websites under transparency drives.

The UK Audit Commission reported that Council officials were being tricked into making payments - intended for building firms and other contractors - into false bank accounts. Last year the Commission found that councils across England detected more than £185m worth of fraud - up 37% on 2009/10.

This problem will not go away so vigilance is the order of the day.

Time to boost morale

Whilst carrying out assignments for companies ranging from SME’s to publicly listed corporations, I am struck by the poor attitude of many senior managers towards the Company’s most important asset namely its Staff.

Presently we are being bombarded with negative news- failing economies, the squeeze on domestic budgets, the spectre of unemployment as evidenced by yesterday’s figures from the ONC showing UK unemployment rising to 8.3%..

This constant drip feed of bad news is having a very negative impact. Morale in the workplace at present is generally at a very low point and yet this seems not to have percolated into the mainstream of management thinking.

All too often the attitude of the management seems to be that the current backdrop will of itself be the motivating factor.

Obviously as companies struggle with their profitability, it is not a question of throwing money at the workforce but what is required is more of an attitudinal change.

Bringing the staff on board may well be as simple as communicating the company’s situation in a clear and concise manner rather than the heavy handed “if you don’t like it there are plenty of others ready to take the job”.

It is no coincidence that the companies who emerge stronger from challenging times have been able to do so largely as a result of the efforts of a committed and diligent workforce.

People are the main asset and as such should be valued accordingly. 

The Dragon pauses to catch its breath

Since 1978, China's economy has doubled every eight years. Today, the average Chinese person has some ten times the purchasing power they had just a quarter century ago.

China was the engine room powering the Global boom of the early 21^st century, however there are signs now that the Dragon is catching its breath.

October shipments from China rose 15.9% from a year earlier, down from a 17.9% growth in September and 24.5% in August.

Meanwhile, imports grew 28.7%, resulting in a trade surplus of $17bn (£10.7bn)

The data underscores growing concerns about the impact of a global slowdown on China's export-led growth.

European markets are crucially important to China but with European economies in a fragile state the implication for Export growth is obvious and the potential for the euro debt crisis to spread would result in a further decline in export growth in the months ahead.

Make service your USP

We are operating in times when everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

It is a paradox that as times become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

From the frustrations of automated answering (devised surely to test anyone’s patience to the ultimate degree) to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

Little wonder that they choose to vote with their feet. Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued not just “one of a number” or even worse a nuisance.

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

Survival of the fittest

The retail sector is particularly challenged at the present with the survival of many outlets dependent upon the results of the next few weeks pre Christmas trading.

The new buzz phrase in retailing is "multi-channel", loosely defined as a strategy that involves selling through stores, websites, mobile phones, catalogues, social networking sites, et cetera. Basically it is an all encompassing process designed to maximise sales revenues.

Not all business models can embrace this system but there has rarely been a time when the old adage of “work smarter” has been more relevant. As more and more obstacles are thrown up to threaten operating margins everyone in any commercial organisation must ensure that they are operating at optimum efficiency.

Retailers are pinning their hopes on “multi channelling” – but they are not the only sector having to radically re-think strategy in these turbulent times.

The inability to adapt to the requirements of the changing market place will inevitably see many companies joining the long list of corporate failures in the months ahead.   

Time to cut the Cruise control

During my various assignments one observation holds true – whilst there are very few bad businesses, there are many that benefit from a fresh input.

One of the biggest handicaps facing any business is inertia but when you are personally involved it is not always easy to change direction or take appropriate remedial action.

This is where an “outsider” can be of assistance – an objective appraisal can very often mean the difference between merely drifting as opposed to decisively moving forward

Can you trust your controls?

Shares in the camera giant Olympus fell as much as 30% on Tuesday after the company admitted to hiding losses on securities investments for decades.

This is not an isolated event, think of the recent problems with losses incurred by various Banks. However it highlights how vital it is that Senior Management set clear defined operational and reporting procedures.

In many companies the Directors simply do not have the understanding of the mechanics or the day to day activities of the business which they purport to run.

In trading environments it is not uncommon that totally unrealistic profit targets have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

Some of the most spectacular financial flame outs have followed a period of ostensibly highly successful trading. In their desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is!

If your company is bucking the trend in these difficult times it may well be that you are implementing a winning formula.

However history tells us that it is often a prudent course of action to look under a few stones – just in case.