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SICKNESS IN VENTURE

Sickness in a venture refers to a state where principal or interest remains overdue for two consecutive quarters, leading to significant erosion of net worth due to cash losses. The impact of sickness includes unemployment, unpaid dues, and asset non-utilization. Common causes encompass personal issues, poor management, operational challenges, and financial mismanagement. Recognizing these symptoms early is crucial for prevention and recovery, emphasizing the principle that "prevention is better than cure."

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SICKNESS IN VENTURE

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  1. SICKNESS IN VENTURE

  2. RBI definition: principal or interest has remained overdue for two consecutive quarters in a financial year and there is an erosion in the net worth due to the accumulated cash losses to the extent of 50% or more

  3. Impact – unemployment, non-payment of dues, blockage of finance, non-utilization of assets

  4. Causes of sickness- • Personal • Lack of integrated knowledge/ training • Incompatible personalities • Health • Shift in attitude • Succession • Management • Form of ownership • Wrong choice of product/location • Team building • Planning • Management information systems • Inability to manage growth

  5. HR issues • Faulty recruitment • Wage structure • Industrial Relations • Low productivity • Operational issues • Technology obsolescence • Quality up gradation

  6. Production Management • Plant location & layout • Quality • Capacity utilization • Inventory • Maintenance • Environment • Waste management

  7. Financial • Capital structure • Capacity to bring capital • Poor resources management • Costing/pricing policy • Over-dependence on concessions & subsidies • Diversion of capital • Over-trading • Unfavorable gearing • Lack of tax planning

  8. Marketing • Over-dependence on a single customer • Marketing myopia • Sales &distribution set-up • Market feedback/ research • Marketing strategies

  9. Government • Changing policies • Scale of economy • Controls • Fiscal policies • Role as facilitator • Act of God • Accidents and injuries • Catastrophes and disasters

  10. B I F R Board for Industrial and Financial Reconstruction

  11. Prevention is better than cure

  12. The Success Trap All great companies have some kind of success formula. It could emanate from a unique set of strategic frames, resources, processes,relationships or values. But when the formula hardens,companies lose a vital ingredient for continued success

  13. Is your company at risk? Symptoms of Active Inertia • Strategic frames become binders “We are a growth company” “We know our competitors well” “We are number one” • Resources harden into millstones “Our brand means the product” “We have it all” “Our technology is a fortress”

  14. Processes lapse into routines “We have a ‘bible’ for critical processes” “We hire and promote people like us” “We make our decisions by consensus” • Relationships become shackles “We know our place in the value chain” “We do the important tasks in-house” • Values ossify dogmas “We are a family, not a company” “We have a campus, not a headquarter” “Our competitors are our enemies”

  15. Source: Donald N Sull in his book “Revival of the Fittest: Why Good Companies Go Bad And How Great Managers Remake Them” : Harvard Business School Press,2003

  16. Thank you

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