The corona crisis has Europe in its grip. No industry is immune to the current effects of international restrictions and lock-down. But while in many places there are already discussions about lifting these restrictions, and some countries such as Austria have already decided to do so, economic experts are certain: the crisis is far from over. For what will follow the current corona pandemic will be a mass death – not of people, but of all those companies whose financial basis is too narrow to successfully bridge dry spells of this scale. What could follow the corona virus are so-called zombie companies – companies that can only cover their financial obligations with cheap loans because the profits generated from operations are not sufficient. These will probably be the first victims of the economic recession that follows the corona crisis.
The road to ruin: over-indebtedness through cheap loans
This is not surprising, since the money of big banks was rather loose in the past years due to the miserable interest rate development. Many companies have taken advantage of the generous financing offers of their banks – some have even too much. If business now collapses due to a lack of demand, suppliers failing or market competition shifting, there is the threat of over-indebtedness, which has the potential to lead to a quick but painful death. It is questionable, but remains to be seen, whether the aid packages adopted by the German government will bring a relief here. In order to be prepared for the time after the crisis, companies must make their own provisions. Otherwise, they run the risk of being crushed under the wheels of the economic crisis ahead.
What to do when suppliers and business partners break away?
But how can companies protect themselves from the pull of bad loans? – A comprehensive Business Continuity Management System plays a key role here. To understand the potential impact of the loss of important resources or processes on your company's business operations, a detailed assessment is required. This involves identifying all business processes, so of those processes that directly contribute to value creation, and assess their critical resources. Based on a business impact analysis, concrete strategies need to be developed to effectively bridge a loss of these resources and processes in case of an emergency. Contingency plans tailored to specific scenarios become a tool for survival in times of crisis.
Prepare for the crisis after the crisis – Security Island provides professional Business Continuity Management Training for employees and managers.