Category: Insight | Date: 06/07/2022

Xenia Xtra Series: Point 2 - Always remember, no one is too big to fail or encounter issues!

The term ‘too big to fail’ entered the vocabulary once again during the financial crisis in 2008. It was seemingly the impression that many large companies had of themselves that they were so large, vast and integral to the system that if they went bust or run into financial difficulty, they’d have a catastrophic chain reaction on the economy, supply chain and the relevant industry…thus attracting financial support under a fixation of complacency embedded within the organisation.

Complacency can be common place in everyday life and sometimes is a killer from a credit risk perspective in view of a robust financial status, an existing long term relationship, commercial pressures and overall reputation, all key measures considered in enabling trade. Looking at the dramatic changes, more importantly in the short horizon associated with the trade credit space just illustrates it’s extremely difficult sometimes to predict in this game no matter how big or successful a business appears on the outside! Often when such events occur as has been the case in recent years with Palmer & Harvey, Carillion, Blockbusters, Toys R Us and the iconic Lehman collapse a clear insightful trend and lesson is seen right across the realm and this educates and provides that extra ingredient and case to businesses in the attempt to strengthen their balance sheets, maintain performance and ultimately their viability aware these events can just as easily happen to them. It is not about pointing the finger or waiting for failure, but applying strong analytical proficiency, building strong business relationships and a supportive network, which can not only negate financial distress but provide the platform to aid health, growth and ultimately sustainability.

The collapse of any high profile business will clearly act as a guide and emphasise whilst accentuate the apparent risks, not only for liquidity, cash flow and financial health but the wider supply chain. This one major facet of the wider supply chain is highlighted a concern given the potential impact a lucrative and dependent channel can have on the overall supply chain fluidity and the echo’s that can reverberate with other firms they have ties with and not forgetting the market itself. So continue to have the same robust procedures for the customers/suppliers who are not too big to fail and continue to challenge any abnormalities even if the organisation concerned is an integral part of the market and your own success.

Roberto Simone
Risk Development Executive