BREWSTER, N.Y., Oct. 21 /PRNewswire/ -- Sharing his thoughts with clients, Michael Bechara, CPA and Managing Director of Granite Consulting Group Inc., a leading corporate risk firm, shocked many by reiterating his risk outlook for late 2010 and early 2011.
"As Halloween approaches, the hobgoblins of resource limitations, process starvation and the 'undead' equity markets not only remain with us, but have gone largely unnoticed by a jaded business community," cautioned Bechara.
In an animated discussion, Bechara explained GCG's view of the five dominant risks for public companies as the end of 2010 approaches. He also gave a self critique of his predictions from 6 months ago. In summary:
1. Energy Price Volatility - Commodities have been on a tear and oil is no exception. Bechara's earlier prediction of difficulties stemming from rising energy prices have come true, but companies should not assume this will continue. "The real story here is not the high price but rather the volatility," he commented.
Companies should be wary of over - hedging their risks against high energy prices as the price could drop leaving them holding the bag. There are a number of geo-political events that could cause a precipitous price swing in either direction.
2. Credit Markets - Here we encounter a deceptive zombie. It appears that the banks are healthy, but beware the rot that lies below the glossy sheen of recovery. With the recent revelations that title to foreclosed properties may be in doubt due to fraudulent or missing documentation (dubbed by the media as ForeclosureGate), the banks may have their last leg kicked out from under them.
3. Structural Changes - Another development called by Bechara months ago. With the financial system seemingly being backed against the ropes once again and the Fed "dead set" against any deflation, be prepared for more game-changing alterations to the business landscape. In addition, the full effect of the slew of recent laws (Dodd-Frank, Healthcare, etc.) is yet unknown.
4. Equity Market Pullback - Beneath the facade of escalating ticker prices is an equity market on life support. The stock markets are dominated by computer algorithms running high frequency trading applications. Everyone knows the retail investor has left the building on this one. What happens when the computers stop the churning?
5. Process Degradation - Another one called correctly. The phantom of headcount reduction continues to haunt the minds of many executives. Like the farmer who taught his horse to go with less and less food each today until he killed the animal, they are quickly realizing that you can only cut headcount so far before you negatively impact the business. Intelligent businesses are taking an ESSA approach (eliminate waste, simplify, standardize and automate).
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
For an irreverent look at economics, finance and accounting, please read GCG's blog, The Weekly Recon - http://www.weeklyrecon.com.
Granite Consulting Group Inc.
SOURCE Granite Consulting Group Inc.