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.