Five Threats Manufacturers, Defense Contractors and Distributors Must Plan for in Late 2010

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Apr 15, 2010, 09:00 ET

BREWSTER, N.Y., April 15 /PRNewswire/ -- In a conference call with clients today, Michael Bechara, Managing Director of Granite Consulting Group Inc., warned of five threats that could face manufacturers, defense contractors and distributors.

"2010 is likely to be another tumultuous year. In this hurricane of the Great Recession, we have recently been enjoying some calm as the eye of the storm passes above us, but by late 2010 we will enter the full fury of the other side," said Bechara.

Throughout the discussion, five recurring themes emerged as the major threats to profitability for 2010. CFOs agreed they need to monitor the following risks over the summer months and prepare for a challenging autumn:

1. Energy Price Volatility - As the price of oil creeps back towards $100 per barrel, long supply chains have once again come under strain. Will oil continue its advance or collapse again?

2. Brittle Credit Markets - This theme has received much attention in the media and many believe this phase is behind us. Not so. As the residential and now commercial real estate markets continue to deteriorate, banks will be faced with shrinking capital ratios and will likely tighten credit further.

3. Structural Changes - The rules of the economic game will change with more frequency and at a quicker pace. As the unsustainable patterns of behavior (overpriced real estate, dependence on consumer spending, etc.) continue to unwind there will be calls to implement structures to maintain the unsustainable. A failure to confront new realities quickly by management will be a significant handicap.

4. Equity Market Pullback - With the DOW breaking through 11,000 many experts are warning of a sharp pullback or even another collapse. Companies that are considering public offerings or that depend on equity ratios for bank covenants should be considering this in their calculations.

5. Process Degradation - The recent spate of restructurings and layoffs have taken their toll on company business processes. Staffs have already been cut and the only way to increase productivity and effectiveness is through process redesign and efficiency. Companies that risk process breakdowns may stumble during the most competitive part of the race.

ABOUT GRANITE CONSULTING GROUP

Granite Consulting Group is a corporate governance, risk and financial management consultancy consisting of former finance executives (CFOs, Heads of Internal Audit and Controllers). Granite has recently developed an advanced neural network risk assessment model capable of identifying and analyzing risk in complex environments. http://www.consultgranite.com

Michael Bechara, CPA is Managing Director of the Granite Consulting Group Inc., a corporate governance, risk and financial management consultancy based in New York. Known as a corporate risk expert, Michael typically works with CFOs, Audit Committees and financial managers to improve processes, identify risks and increase profitability. Under Michael's leadership, Granite has developed an advanced neural network risk assessment model capable of identifying and analyzing risk in complex environments.

For an irreverent look at economics, finance and accounting, please visit the Granite Consulting Group Inc.'s blog at http://www.weeklyrecon.com.