I want to eventually create an evolving article and collection about different factors that determine the ability of a company to manage its downside risk.
(Msg originally written in response to @Magaly in Volkswagen Scenarios)
You are right that management is a very important factor that determines how a company navigates through a crisis and trying to figure out the capability of management in this regard and sufficient situational awareness, conservatism and risk-aversiveness is actually one of the things to look for when analyzing management.
The current VW management is different from 2008, but I believe (and hope) that the current management is capable of managing a crisis. This is based on my current understanding but more research is needed into the topic as production targets have been raised earlier this year.
Other factors that determine how well a company can get through a cycle are (non-complete list):
- Cyclical demand vulnerability
- Ability to influence demand with prices
- Government support willingness and measurements
- Working capital needs and cash preservation options
- Negotiation strength with suppliers
- Flexibility to scale production up or down
- Labor cost control options
- Initial Margins before the crisis
- Product mix and ability to scale back products with bad margins
- Saving potential with planned investments
- Savings potential with marketing
- (Debt) financing options
- Debt maturity profile
- Balance sheet health (E.g. potential bad loans)
- Options to sell parts of the business or do a capital raise
- Competitive strength (margins, product resilience in times of crisis in specific industry segment e.g. premium/economy, customer loyalty)
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Thats sounds very cool, to be honest never have done research in this. If you do it at some point, I would like to learn from it.