Member Article

Contingency Plans for Eurozone crisis needed, say KPMG

Businesses in the North East should consider forming contingency plans to prepare themselves for changes to the Eurozone, according to KPMG.

One third of management teams in the region have yet to implement emergency measures to deal with the European sovereign debt crisis, indicating that many are unclear of the impact that collapse could have on their business.

This week Spanish and Italian economies have come under scrutiny, as politicians, economists and central bankers attempt to find a solution. Further defaults, bail outs and even exits all remain as possible outcomes.

Mark Firmin, KPMG’s Northern Head of Restructuring believes that the first step for businesses is to consider whether and how they might be impacted by scenarios such as an exit by a Euro economy.

He said: “Certainly the boards and management teams of local companies with customers, operations or critical suppliers in the Eurozone should be making plans and taking actions here and now to protect themselves from the heightened risks of the crisis, preparing for a range of potential outcomes as the situation evolves over the coming weeks and months.

“The initial focus for action is treasury and management of cash in the business, which just one in five companies have underway.

“Attention also needs to be paid to the current and potential impact of the crisis on customers, operations, supply chains and the back office.”

Firmin advises North East management teams to take a number of key steps to prepare themselves for any changes. Businesses should look to focus on developing mitigation and failure risk plans for critical suppliers, whilst also focussing on forecasting and analysing management information.

They should also consider revisiting revisiting continuity and contingency plans in the context of a default or exit, agreeing on trigger events and covering group and local businesses as well as critical distributors and suppliers.

Changes in the Eurozone could also present opportunities, and as some businesses exit or limit operations in certain countries, this could offer up new market shares.

Firmin concludes: “There are an unsettling number of potential impacts on businesses in this region, from bank liquidity issues to fraud risk, which can rise during times of confusion and rapid change, but the key message is that corporates need a good radar and decision making process; they need to be able to monitor the situation and have plans in place, allowing them to respond quickly as the Euro situation unfolds.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .