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Tag: Bankruptcy

  • General Motors: Driven to Succeed

    Company Profile is an initiative by StartupTalky to publish verified information on different startups and organizations. The content in this post has been approved by General Motors.

    General Motors, a multinational corporation based in the United States, was the leading automobile company for 77 years until it was surpassed by Toyota in 2008. Despite this, GM has consistently ranked among the top 15 companies on the Fortune 500 list, and recently moved up from No. 8 to No. 5. With operations in eight countries and four brands, GM is also involved in joint ventures with Chinese automakers and produces military vehicles for the US government.

    General Motors – Company Highlights

    Company Name General Motors
    Headquarters Michigan, US
    Sector Automotive
    Founder William C. Durant, Charles Stewart Mott. Frederic L. Smith
    Founded September 16, 1908
    Website gm.com

    General Motors – About
    General Motors – Automotive Industry
    General Motors – Founders and Team
    General Motors – Startup Story
    General Motors – Mission and Vision
    General Motors – Name, Tagline, Logo
    General Motors – Business Model
    General Motors – Revenue Model
    General Motors – Employees
    General Motors – Challenges Faced
    General Motors – Mergers and Acquisitions
    General Motors – Awards and Achievements
    General Motors – Competitors

    General Motors – About

    General Motors are the manufacturer, marketer, and distributor of vehicles and vehicle parts. GM is a public company owned by shareholders. General Motors formerly known as General Motors Corporation has been the world’s largest motor-vehicle company for most of the 20th and early 21st century. With a global presence, General Motors operates manufacturing and distribution plants not only in the United States and Canada but also across many other regions of the world. The company is majorly involved in the production of automobiles and trucks which also includes automotive components.

    General Motors – Automotive Industry

    The automotive industry comprises a wide range of companies and organizations involved in the business of manufacturing, design, marketing, and distribution of automotive products. The automotive industry began in the 1860s with a lot of manufacturers that pioneered change in the carriage system. Earlier the manufacturing process involved a lot of labor from engineering to very little work. At the beginning of the 1960s robotic equipment was introduced and now most of the work is automated. General Motors is been a leading manufacturer in the industry for decades.

    General Motors – Founders and Team

    The origins of General Motors date back to September 16, 1908, when the company was originally founded. However, the present-day version of the company is the result of a reorganization that took place on July 10, 2009. General Motors was established by William C. Durant, Charles Stewart Mott, and Frederic L. Smith.

    William C. Durant

    William C. Durant - General Motors
    William C. Durant – General Motors

    William Crapo Durant was a leading pioneer of the United States automobile industry. He co-founded General Motors and Chevrolet. He was the one who introduced the system of multiple marques with different automobile lines. He also founded Frigidaire.

    Charles Stewart Mott

    Charles Stewart Mott - General Motors
    Charles Stewart Mott – General Motors

    Mott was an industrialist and businessman in America. He co-founded General Motors along with the other two. He initiated the idea of building colleges and pledged $1 Million towards the project. He also founded the Flint Senior College now the University of Michigan – Flint.

    Frederic L. Smith

    Frederic L. Smith - General Motors
    Frederic L. Smith – General Motors

    Frederic Latta Smith was the pioneer of the automobile industry. He was one of the founders of the Olds Motor Works before he co-founded the General Motors Corporation in 1908. During the early years of the Association of Licensed Automobile Manufacturers Smith managed to be its president.

    General Motors – Startup Story

    In the early 1900s, the General Motors company was formed under the leadership of William C. Durant. The formation was to consolidate several motorcar companies like Buick, Oldsmobile, Oakland, Marquette, and other several autos. This consolidation also includes Reliance and Rapid Trucks. The auto giant was the innovative body that first introduced the electric self-starter in 1912. Though it became obsolete in the beginning. GM became the leading American passenger car manufacturer in 1929.

    Durant first formed the company as a holding company, with Charles Stewart Mott as a partner. The name was initially borrowed from General Electric. In 1919, with the acquisition of Guardian Frigerator Company, became the GMAC, General Motors Acceptance Corporation. GMAC provides financing to automotive customers and the acquisition was renamed Frigidaire.

    In 1920, GM heavily competed with the Ford Motor Company under the leadership of Alfred P. Sloan. He implemented the pricing strategy from least to most expensive vehicles in his annual model changes. Sloan also created a market for the previous year’s car models as used cars. In 1921, GM patented the tetraethyllead (gasoline) compound and also developed Chlorofluorocarbons both were banned in the later years as harmful ingredients for the biosystem. In 1926, the Pontiac brand was introduced by GM along with the insurance program for its employees. In 1927, Sloan created the ‘Art and Colour Section’ of GM and Harley Earl was its first director. The automobile design created by Earl is still in practice. After Earl, Mitchell took over the design for GM.

    GM invented the breakthrough in heat treatment by introducing the Jominy end-quench test for the hardenability of carbon steel in 1937. In 1939, the company placed its feet in the vehicle insurance market by finding the Motors Insurance Corporation. In the same year, the company introduced the world’s first affordable and successful automatic transmission.

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    Vast quantities of production happened during the times of world war 2 when the company supplied armaments, aircraft, and vehicles for the Allies of World War 2. Its German factories were destroyed by the U.S. forces during the war for which a compensation of $32M was received by the company.

    In 1962, the first turbocharged engine was introduced by the GM for the Oldsmobile Cutlass Turbo-Jetfire. In the next two years, the company introduced its “Mark of Excellence” logo and trademark at the 1964 New York World’s Fair. The company used this mark as its main corporate identifier until 2021.

    The first-ever hydrogen fuel cell car was released by General Motors Company in 1966. Though fuel cells were already in existence, GM was the first one to use them to power the vehicle. The budget to use the power cell supplied by Union Carbide was millions of dollars. It also introduced the first-ever turbochargers and gas turbine vehicles powered by kerosine, but later the techniques were abandoned due to the oil crisis in 1973.

    GM produced the first rear-wheel anti-lock braking system for two vehicles namely the Toronado and Eldorado. The Oldsmobile Toronado is also the first retail car with a passenger airbag introduced in 1973. In 1975, GM installed the first catalytic converters in its models. The converters are exhaust emission control devices that convert toxic gases into less-toxic pollutants. Year after year GM proved itself by introducing various new techniques and innovations in the market.

    In 1987, GM built the Sunraycer, which won the inaugural World Solar Challenge. This invention was a showcase of advanced technology. Later, in 1990, GM debuted the EV1 concept which is a battery electric vehicle at the LA Auto Show. But the EV1 lease was available to only a few dealers in California and Arizona. Production was stopped for this product as it would not be profitable for the company. This disappointed many people which led the company to deactivate and destroy the EV1s, 40 of which were donated to museums. The documentary film ‘Who Killed the Electric Car?’ covers the story of EV1. In 1993, Lotus cars by GM were sold to Bugatti.

    It was in 1996, that GM completed the corporate spin-off of Electronic Data Systems. The next year, GM sold its military businesses of Hughes Aircraft Company to Raytheon Company. Being the king of inventions in the automotive industry, GM introduced the first full-sized pickup truck hybrid vehicle, the Chevrolet Silverado Sierra trucks in May 2004. Other than these mild hybrids, GM also developed another debutante using hybrid technology, along with DaimlerChrysler and BMW. In the same year, GM sold the electro-motive diesel locomotive design to Berkshire partners and Greenbriar Equity group.

    GM added its “Mark of Excellence” emblem in all its productions till the reorganization in 2009. In 2005, GM newly created the vice president position to lead a global automotive design organization and made Edward T. Welburn the first VP. 2006 was the year when GM introduced the yellow gas cap on its vehicles to identify them as cars operated using E85 ethanol fuel and Saturn Vue Green Line.

    In 2008, GM concentrated on reducing landfill waste to achieve the status of landfill-free production. It started recycling and reusing the wastes from manufacturing processes. This was the year GM was conscious about the environment and offered a 2-mode hybrid system in most of its vehicles. It also installed the world’s largest rooftop solar power installation in its manufacturing plant in Zaragoza.

    In March 2009, the company received bailouts of $17.4 B under the presidency of Barack Obama. Then, GM motors filed a chapter-11 reorganization and sold its assets including the logo to the new company and thus the new GM was born. General Motors Canada was not a part of Chapter 11 bankruptcy. The US department of treasury invested $49.5 B through the Troubled Asset Relief Program in GM and recovered only $39B with a loss of $10.3B. It also invested in the GMAC financing companies and had a profit of $2.4B. In 2009, the company shut down the production of the Saturn and Pontiac brands due to a lack of potential buyers. It also sold Hummer and Tengzhong in the same year.

    After the reorganization, the company appointed a new CEO and made changes to the BOD team. The company became public through its public offerings in November 2010. This is one of the world’s top five largest IPOs to date. In the same year, the company became profitable. In the later periods of 2010, GM introduced extended-range electric vehicles (EREV) with backup generators powered by gasoline.

    In 2013, GM and Honda partnered to develop a fuel cell system and hydrogen storage technology. They are the leaders in fuel cell technology holding most of the patents for fuel cells from 2002 to 2012. In 2015, the second generation Volt was launched in the United States and Canada. In 2017, GM introduced an autopilot feature in certain models of cars. In the same year, the GM Venezolana plant was seized by the Government of Venezuela in Valencia, Carabobo.

    In November 2018, GM laid off 14000 employees in North America as it comprised the workforce by 15% and executive staff members by 25%. In 2019, GM ceased the production of the Chevrolet Volt and announced to begin of the production of the EV model in Lake Orion, Michigan. In January 2020, GM announced the return of the Hummer nameplate within the GMC portfolio known as GMC Hummer EV.

    GMC Hummer EV

    During the Covid period, GM assisted Ventec life systems to produce Ventilators. In September 2020, GM announced its partnership with Nikola Corporation to engineer and manufacture the Nikola Badger. Later, GM was committed to increasing capital investments in electric vehicles. GM in January 2021 announced its plan to stop the production and sales of fossil fuel vehicles as part of its goal to reach Carbon neutrality by 2040. It also announced its plan to start an automotive battery and battery pack laboratory in Michigan. GM facility at Brownstown Township is chosen to be upgraded as a battery pack plant. In April, GM announced its joint venture with LG to build batteries for electric vehicles.

    Lately, GM also made the largest investment project in its home state, Michigan to invest $7B to convert plants to produce electric plants and build new battery plants.

    Leading car brands in the United States in 2021, based on vehicle sales
    Leading car brands in the United States in 2021, based on vehicle sales

    General Motors – Mission and Vision

    The original mission statement of GM is to earn customers for life by building brands that inspire passion and loyalty through not only breakthrough technologies but also by serving and improving the communities in which we live and work around the world.

    The vision of the company is to stand together to drive the world forward. The statement is, “Everybody in. Our goal is to deliver world-class experiences at every touchpoint and do so on a foundation of trust and transparency.”

    General Motors - Logo
    General Motors – Logo

    General Motors Company was formerly known as General Motors Corporation. The logo of GM fades from light blue to dark blue with GM letters in lowercase type. The logo intends to evoke the clean skies of a zero-emissions future and the energy of the Ultium platform. The company had only two basic emblems from the beginning of the company which is a script wordmark and a bow-tie design. The most recognizable bow-tie symbol was introduced in 1913 by William C. Durant on the Royal Mail model.

    General Motors – Business Model

    General Motors uses the Generic Strategy from Porter’s model as its business model. The competitive strategy of this model is cost leadership. This creates a competitive advantage based on the low costs of products.

    General Motors – Revenue Model

    The main source of revenue for the company is vehicle sales. It also earns an equal amount of revenue from its financing companies called GM Financial. The main stream of income for the company from the beginning is the manufacturing, assembling, and distribution of vehicles.

    General Motors – Employees

    General motors currently have 1,57,000 employees working in the company. The reward program at GM includes compensation, paid time off for holidays, high-quality health care, and GM family savings on vehicles, parts, and services.

    General Motors – Challenges Faced

    GM was the leading automobile industry for almost 77 years before its bankruptcy in 2009. The bankruptcy was due to the rising gas prices as consumers started looking elsewhere for fuel-efficient cars. When the sales went down, the company struggled to meet even the fixed cost expenses.

    General Motors – Mergers and Acquisitions

    General Motors had several acquisitions all these years. Here is a timeline glimpse of the latest and key acquisitions made by the company.

    Acquisitions Acquired Date
    Cruiser RV March 2016
    Cruise March 2016
    Sidecar January 2016
    Cadillac July 1909
    Vauxhall Motors 1925
    Packard Electric 1932
    Euclid Trucks 1953

    General Motors – Awards and Achievements

    General Motors bagged 4 awards in 2018 and 3 awards in 2017. It won the best CEO award in 2018.

    General Motors – Competitors

    General Motors ruled as a monopoly for the most of 20th century and the earlier times of the 21st century. But, it also has some heavy competition in the market like Tesla, Toyota, Chrysler, Honda, and Ford.

    FAQs

    What is General Motors known for?

    General Motors Co. engages in the designing, manufacturing, and selling of cars, trucks, and automobile parts.

    What does General Motors own?

    General Motors owns Buick, Cadillac, Chevrolet, and GMC. Hummer returned as a GMC sub-brand. GM has a formal partnership with Honda to co-develop EVs.

    What is the biggest controversy faced by GM?

    GM was accused of having assisted the Nazis war during the second world war.

    What was the reason for the failure of GM in India?

    GM failed in India due to poor product planning and the lack of adaptability to the market.

  • Top 26 Recession-Proof Businesses and Jobs That Can Thrive in Any Recession

    What is happening in Ukraine is heartbreaking and makes us realise how fragile our system and everything is. How easily we can be deprived of our daily routines and how we must be prepared for this from the start. Many people have lost their homes, their belongings, and their jobs.

    The conditions are horrifying in Ukraine. Losing everything is scary. One must be fully prepared from the beginning if one wants to be safe during tough times, especially when it comes to jobs. These recent events have opened our eyes and made us realise the importance of recession and war-proof jobs.

    During difficult times such as wars, epidemics, depressions, and so on, recession-proof jobs are ones that are largely unaffected even if all other industries are shutting down or losing employees. With the recent pandemic strike and now the happenings in Ukraine, people are shifting their interests towards these types of jobs, which provide a guarantee of employment and support no matter what.

    This article will define recession, its causes, and provide examples of jobs that are both recessions- and war-proof.

    1. Food and Beverages
    2. Services in the Medical Field
    3. Renovation and Repair Industry
    4. Cleaning Services
    5. Baby Products
    6. Child Care
    7. Consumer Goods
    8. Services for Death and Funerals
    9. Senior Care Takers
    10. Hospice Workers
    11. Educators
    12. Public Transport Workers
    13. Body Shops & Auto Mechanics
    14. Pharmaceutical Technicians and Pharmacists
    15. Law Enforcement
    16. Workers in the Correctional System
    17. Public Utility Workers
    18. Judiciary Workers
    19. Firefighters
    20. Insurance Professionals
    21. Actuaries
    22. Social Workers
    23. Mental Health Experts
    24. Divorce Attorneys, Mediators, & Arbitrators
    25. IT Workers
    26. Bankruptcy Attorneys & Staff

    What is a Recession?

    Simply put, a recession is a period of time when the total global economy experiences a decline. During these times, people lose their jobs, companies go out of business, and there is an overall rise in unemployment. A recession lasts for several months till the situation gets better. The average citizen suffers the most from the recession, as a result of unemployment, rising prices, and a lack of support from higher authorities.

    What causes a Recession?

    There are many causes of a recession like deflation or loss of customers’ confidence in a company, but the major cause is economic shock, which can be due to natural disasters, terrorist attacks, pandemics, or wars. We have just faced a recession due to COVID-19 and now due to the Ukraine-Russia situation. Due to these types of events, a recession can happen and thousands of people can lose their livelihoods, that is why there is always a high demand for recession-proof jobs and businesses.

    Following are some examples of recession-proof jobs and businesses:

    1. Food and Beverages

    Food Business
    Food Business

    One thing that is vital for humans is food. If there are no food industries making food and beverages, then a humane society can not function. That is why even when there is a pandemic and everything in the world is shut down, the food industries are still booming and all the employees are there working. Food for eating and beverages for drinking is not something that can be marketed as unnecessary and put aside during tough times as everyone needs it to be alive.

    2. Services in the Medical Field

    Healthcare Services
    Healthcare Services

    People get sick and different diseases require medical attention, thus there will always be a demand for healthcare services. Survival in these difficult times will be impossible if medical assistance is unavailable.

    Even during a recession, healthcare services will not be interrupted. People require medical attention the greatest during a recession. As a result, the medical business will never diminish. Doctors, nurses, and chemists are all in high demand during such times.

    3. Renovation and Repair Industry

    Repair Services
    Repair Services

    The renovation industry is always needed, no matter what the situation is. Because some things can only be fixed or installed by professionals. For example, if your phone breaks and needs to be repaired right away, it is an emergency that must be handled properly and fast, especially in times of war or epidemic. A mobile phone repair service is the only option.

    Repairing electricity, installing a security system, and upgrading your home for increased safety or to accommodate weather changes all necessitate knowledge and abilities. And after a war, reconstruction of everything that was destroyed due to the war is required. That is why, in difficult circumstances, the renovation and repair industry is critical.

    4. Cleaning Services

    It’s critical to have the finest health possible through difficult times so that you can confront anything that comes your way. And keeping yourself and your environment clean is the best way to stay fit and healthy.

    We, as humans, live in a world where personal hygiene is extremely important, which is why cleaning businesses will never fail or go out of business since people will always buy it. Cleaning materials are a necessity, not a luxury.

    5. Baby Products

    Baby Products
    Baby Products

    Parents cannot make compromises or sacrifices when it comes to their children. That is why, even in the face of adversity such as war or a pandemic, the need for infant products will never dwindle.

    Parents cannot experiment with the items they use on their newborns since they require the highest care and delicate products. If they do, it may result in significant health concerns. As a result, baby products such as diapers, baby food, and baby soaps will always be sold and purchased by the general population.

    6. Child Care

    As previously said, parents cannot make concessions when it comes to their children’s health and well-being. As a result, healthcare for children and those who work with them will always have a career because it is one of the needs in difficult times. Children, who are the most vulnerable, require the most medical attention during a recession, like wars, etc. As a result, child care is extremely important and will continue to exist.

    7. Consumer Goods

    Even in times of war or pandemic, people require basic necessities such as sanitary napkins, toothpaste, laundry detergent, and a variety of other items to be healthy. Whatever happens, these things will continue to be sold, and the people who work in these businesses will continue to have livelihoods.

    8. Services for Death and Funerals

    During COVID-19, there was a surge in demand for funeral services. The funeral sector is the one that blooms the most during any recession, especially during wars and pandemics. Funeral homes are what people resort to when they have to say goodbye to their loved ones because no one can avoid death, and many individuals lose their lives during these difficult moments.

    9. Senior Care Takers

    Elderly Care takers
    Elderly Caretakers

    Tough times like a pandemic or a war can be extremely dangerous for the elderly. And during these times the demands for senior caretakers such as nurses, cooks, cleaners, and other support staff get really high. That’s why it can be a great opportunity for people looking for a job that can pay even during a recession.

    10. Hospice Workers

    The majority of people die in difficult circumstances. Unfortunately, this is the case, but specialists must be available to care for those who are nearing the end of their life. Hospice workers are professionals who care for people who are nearing the end of their lives, which might be due to a terminal illness or old age.

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    11. Educators

    Educators
    Educators

    Whatever the situation, people still need to be educated. Two of the most powerful instruments for overcoming the financial crisis are education and knowledge. Humans, as individuals and as a civilization, must learn in order to survive and contribute to the growth of their community. As a result, teachers and educators in all areas are valued highly and are unlikely to lose their jobs during a recession.

    12. Public Transport Workers

    Public transport is the best way to save money, especially during times of recession. Thus, public transport workers will always have a job and they will be even higher in demand. Even if the economy goes down, the professionals like bus drivers, train drivers, train conductors, and many more, will have their jobs.

    13. Body Shops & Auto Mechanics

    Even though there will be fewer personal automobiles and vehicles on the road, they will need to be repaired. What if you have to travel urgently, perhaps during a war or pandemic? The cars must be in good working order. That is why the auto mechanic position will not be eliminated.

    14. Pharmaceutical Technicians and Pharmacists

    Medicines are needed by all age groups. No matter what’s going on in the world, that is why individuals related to the pharmaceuticals field will never lose their job as their job is vital and plays an important role in a recession.

    15. Law Enforcement

    Law Enforcement
    Law Enforcement

    There will always be a need for police officers, detectives, federal agents, and other law enforcement officers because no one can take their place. Particularly during a recession, those with specialised skills in these sectors will be in high demand as the crime rate might increase.

    16. Workers in the Correctional System

    People working in prisons, parole boards, and other offices won’t be losing their jobs either, as their services are important too. Even in a recession, letting the prisoners out will only increase the problems.

    17. Public Utility Workers

    During a recession, staying connected to your loved ones and the outer world is the only thing that can reduce stress. As seen during the COVID-19 pandemic, one way to keep calm was to stay connected to your loved ones through the internet, phone calls, texting, etc. Different sources of entertainment are also important to keep your mind busy and distracted for a while. And these services are possible because of the individuals working in these fields. That’s why these jobs are never going anywhere.

    18. Judiciary Workers

    Courts will operate no matter what and the people employed there, like judges, lawyers, clerks, sheriffs, etc. all have their jobs intact and won’t lose their job. Even though some courts were closed for a while due to COVID-19, that was to control the contagious disease. Despite that, courts are always operating.

    19. Firefighters

    FireFighters
    FireFighters

    Accidents like fires will happen, and they cannot be predicted. So, in order to control that and save lives, a profession like a firefighter and all jobs related to this field will continue to exist even in a severe recession.

    20. Insurance Professionals

    Insurance Brokers
    Insurance Brokers

    Health insurance is crucial to most people, and they will keep it even in a recession, so there will always be a need for insurance brokers and professionals in this industry. Not only is there health insurance, but there is also automobile insurance, which is required to legally keep your car on the road.

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    21. Actuaries

    Actuaries help businesses cut extra expenses and keep the business running during a financial crisis. Individuals in this field will have their jobs as their services will be needed most by both private and government companies.

    22. Social Workers

    Social Workers
    Social Workers

    Social workers will be needed most during a recession as more and more people will be looking for support. Many people lose their homes and their livelihoods during a recession, which is why social workers and their services are needed.

    23. Mental Health Experts

    Mental Health Expert
    Mental Health Expert

    During a recession, the normal population gets affected the most. That can lead to some serious mental stress that can cause problems, which is why mental health experts are needed during these times. Substance abuse also spikes due to these conditions, so the demand for experts in these areas can get high.

    24. Divorce Attorneys, Mediators, & Arbitrators

    Financial difficulties and stress can cause couples to split up and compel them to make difficult decisions. According to studies, the stress induced by a recession causes a high rate of divorce and separation among young couples. As a result, there will be a demand for divorce attorneys, mediators, and arbitrators to complete all of this work.

    25. IT Workers

    Even during a recession, there will always be a demand for IT workers because the entire world has become digitised and technology is now the driving force behind it. To keep the websites, applications, and other things working, all of the technicians, programmers, and developers will be needed.

    26. Bankruptcy Attorneys & Staff

    Attorney
    Attorney

    During a recession, there is a high rate of bankruptcy. Financial crises are unavoidable. As a result, employees in this profession will not lose their jobs, as there will be a high demand for their services due to the high rate of bankruptcy filings.

    Conclusion

    Wartime situations demonstrate the need of being prepared and have a plan in case things go wrong. Having a job in a war-proof business can provide financial security and perhaps save your life and that of your family. As a result of recent events, more people are looking for recession-proof jobs, which can aid them during a downturn.

    FAQs

    What industries do best in a recession?

    Grocery stores, Funeral services, Educators, Healthcare, Insurance, and Attorneys are some of the industries that do not get hit by the recession.

    What are the top recession-proof jobs?

    Attorneys, Child Care, Elderly care, Law enforcement, Firefighters, and Educators are some of the top recession-proof jobs.

    What investments are recession-proof?

    Gold, Bonds, and Cash are some of the top recession-proof jobs.

  • Sri Lanka Economic Crisis: Is Sri Lanka Heading Towards Bankruptcy?

    Economics has always been an important thing for a country. You may not like the subject in your school but it is something that is super real in nature. It is basically the allocation of resources to achieve the most optimum efficiency. As the number of people grows in a country, so does the responsibility and the load to be more active and unbiased in every sphere of allocation of resources. Good allocation of resources is important because resources are finite.

    If not managed well, the whole economy can just crash, however big or small the economy is. This is what we are reminded of every now and then. This unusual year brought up the news of a country getting economically unstable. The country is Sri Lanka and it is in a really serious economic condition. The people of Sri Lanka are facing extreme situations associated with their economy. This article focuses right on the same topic.

    Read this article to know about what is happening in Sri Lanka and what the world is saying about it, how the country plans to get out of this tight phase and much more. Here we go,

    A Little Brief About the Sri Lanka Economic Crisis
    The Current Situation in Sri Lanka Due to the Crisis
    Is Sri Lanka Heading Towards Bankruptcy?
    Reasons Behind the Economic Crisis in Sri Lanka
    Sri Lankan Government Response to Crisis
    India’s Relations with Sri Lanka and the Assistance

    A Little Brief About the Sri Lanka Economic Crisis

    Recently, the news broke out about Sri Lanka from which we came to know that the country to the south of India is facing a financial crisis and there are fears of bankruptcy. News resources reported that Sri Lanka is in a super tight place right now and it might have extreme economical conditions in the near future.

    The Sri Lankan foreign reserves have hit a record low where the commercial banks are failing to secure “dollars to finance imports of food, fuel and medicines”, as says Deccan Herald. All of these started with the outbreak of the COVID-19 pandemic, which devastated the country’s tourism sector, a pivotal industry of the Sri Lankan revenue, and also reduced the foreign workers’ remittances.

    To save the country, the Sri Lankan government announced a broad import ban in March 2020. However, this backfired in the form of shooting the food prices up by 25%, as per the reports of February 2022, and has contributed to an overall inflation of 17.5%. Furthermore, the country is also facing 5-hour electricity blackouts each day because the thermal generators have run out of fuel. According to the reports, the country is still battling its $51 billion sovereign debt.    

    It has been heard that he Sri Lankan government had received a $1.2 billion economic relief package from India for a cure. This economic relief package, as announced by the government on January 4, 2022, amidst the ongoing forex crises of the country, ensures that the Sri Lankan government is optimistic about their future. They want to communicate that the country will not default on its international debt.

    The Current Situation in Sri Lanka Due to the Crisis

    The GDP of Sri Lanka over the years

    Sri Lanka’s external reserves were dropped severely in November of 2021. The fall marked the external reserves to $1.6 billion. This fall triggered alarm in most of the domains and quarters of the country. Concerned people warned about this in the government. Economists and Think tank’s warned that this fall in foreign reserves will mean a sovereign default in the future.

    American credit rating organisation ‘Fitch’, after the event in Sri Lanka downgraded the nation’s rating to CC. A CC rating is the lowest rating just before the defaulter tag. It is to be noted that Sri Lanka had a piling pile of feigning debt over the last few years. However, the island has never defaulted on any of the foreign debts until now.

    Fitch Ratings of Sri Lanka
    Fitch Ratings of Sri Lanka

    This downtrend in the year 2020 is seen as the record breaker for Sri Lanka. The current situation is seen as a super meltdown and has impacted the whole island. Living costs are rising impeccably, food shortages are forecasted up this year and as per the reports, Sri Lanka will likely default on the debt that it has accumulated.

    Having said about the economic crisis and the depleting foreign reserves, there are many issues that Sri Lanka is facing right now. Inflation is seen at an all-time high in the country and the basic living conditions are getting costlier. Food prices are skyrocketing and its treasuries are shrinking.

    The economic crisis that the country is facing right now is inhumane and the hole is too deep to get out from. The country appears to be staring at a human crisis that will hurt not only the growth rate in the pandemic era but the basic sustainability index of the country.

    According to World Bank estimates, 5 lakh people in Sri Lanka have fallen below the poverty line since the pandemic struck, which it described as a “huge setback equivalent to five years’ worth of progress”.

    The World Bank has estimated that about 5 lakh people have fallen below the poverty line and this trend started during the Covid 19 pandemic. This setback was so deepening that it took away Sri Lanka’s five years worth of growth with itself. This is a huge shock for the economy of Sri Lanka and the people who make up the economy.

    In further reports, it is said that the country’s economy has contracted by 1.5%, just by the end of the third quarter of 2021. With the new year 2022, it is not going to be easy for Sri Lanka to sustain itself as there are real concerns about the country going bankrupt.

    The government, however, said Tuesday the country will not default on its international debt as it announced a USD 1.2 billion economic relief package.

    Finance Minister Basil Rajapaksa said Sri Lanka would duly pay the international sovereign bond of USD 500 million due in a fortnight, a PTI report said.

    Sri Lanka, which is an Island to the south of India, is a great tourist spot. It is estimated that tourism revenue makes up about 10% of the island’s GDP (Gross domestic product). This was the usual rate in the island country.

    With the onset of the Covid19 pandemic, this rate was badly hit and the tourism sector came to a sudden halt. This had really a cascading effect on the earnings of the nation. However, every other major tourist destination faced this issue but the effect was real. Magnified on Sri Lanka as the tourism there makes up a good chunk of the GDP.

    While the halting of tourists was a good attack on the economy, there were some other reasons as well. The other ascertained reasons for the fall would include, Heavy Expenditures. The president of Sri Lanka, Gotabaya Rajapaksa did some hefty expenditures during the year.

    Gotabaya Rajapaksa - President of Sri Lanka
    Gotabaya Rajapaksa – President of Sri Lanka

    His government tried to cut taxes from people that impacted government revenues. More and more spending led to less and depleting foreign reserves and thus the reserves hit a rock bottom. The country is very high on loans and grants and has China as a major debt partner. The Guardian recently reported that Sri Lanka has massive debt repayments to China alone.

    Sri Lankan rupee (Currency of the island) crashed too. This is basically termed as ‘Inflation’. Inflation reached a record high in Sri Lanka, and is rising continually, leading to a spike in food prices, which was the reason for worry for the common citizens of the country. Reacting to the rise in inflation, President Rajapaksa announced an economic emergency in August 2021, just a couple of months before the foreign reserves crash. This emergency was implemented to control the situation and contain it. The effect was to lessen the hoarding of items by people in their homes, which could lead to more severe shortages.

    Four months went by and as the inflation rose more, basic goods became unaffordable for the general public. Not just that, it has been reported that even well off or socially rich people are having trouble affording basic needs and wants. These many months, the citizens of Sri Lanka faced a tough time to make both ends meet.

    The government had appointed a former army general as commissioner of essential services, giving him the power to seize food stocks hoarded by traders and retailers, and ensure essential items were sold at prices set by the government, but little was done on the ground to lift people out of their misery, the Guardian report said.

    What Sri Lanka is facing right now is inhuman and horrendous. The economic conditions there have seen very tight phases but this phase is the most horrific. Adding to that, this is when the whole world is facing a global pandemic which could lead to any ruins. This has broadened the possibilities of Sri Lanka going bankrupt. After witnessing a drop of 70% in foreign exchange reserves during the past 2 years, the government of Lanka and the people of the island country, are experiencing a currency devaluation and are looking forward for help from the global lenders. According to the latest news dated March 28, 2022, Sri Lanka, which is a country for 22 million people, is struggling to pay for essential imports Let us see what the numbers and opinions about the country say.

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    Is Sri Lanka Heading Towards Bankruptcy?

    This is not a certain statement but the probability of this country going bankrupt has never been this high. It has been reported that the country is super deep in debts and owes tremendous amounts to other counters. Here we are presenting a few stats that prove the misery of Sri Lanka.

    • Sri Lanka owes an amount that is more than $5 billion to China. This is probably the biggest amount of debt that the country has ever taken. The country is paying the China debt in instalments.
    • Not only that, but Sri Lanka is also a debtor to Beijing for $1 billion, which it took to overcome the previous acute crisis. Along with the major countries and regions that Sri Lanka owes money to, it is reported that there are many private and government entities that it owes money to. This situation of enormous debts and depreciating foreign reserves can be a ‘Checkmate’ situation for the republic of the nation.

    “We have high debt from three countries — China, Japan and India. The total outstanding for this year would be USD 6.9 billion,” FM Rajapaksa, the younger brother of President Rajapaksa and Prime Minister Mahinda Rajapaksa, was quoted as saying in the PTI report.

    • The finance minister of Sri Lanka openly announced the amount they owe to countries. He said that Sri Lanka owes a sum total of about $7 billion to countries like China, Japan and even its neighbour, India.

    Sri Lanka’s huge foreign debt burden is one of the main reasons for its economic crisis. As of November, foreign currency reserves available with the country were just $1.58 billion, down from $7.5 billion when Rajapaksa became the president in 2019, the report said.

    National debt of Sri Lanka
    National debt of Sri Lanka

    Amid the falling environment, the opposition party in Sri Lanka also took a dig. An opposition member of parliament, Harsha de Silva (who is also an economist) told parliament that foreign reserves would be in the negative if the rate of decline continues. Moreover, the Sri Lankan newspaper ‘Daily mirror’ quoted “The nation will go totally bankrupt”.

    Opposition MP Harsha de Silva, who is also an economist, told Parliament in December that the country’s foreign currency reserves would be minus $437m by January, and the total foreign debt services would be $4.8 billion between February and October 2022. “The nation will be totally bankrupt,” Sri Lankan newspaper Daily Mirror quoted him as saying.

    De Silva said he was not trying to scare anyone but it was a reality that “all imports will come to a halt, the entire IT system will be shut down including the google map as we will not be able to pay for it”.

    The government has, however, always made an optimistic approach and has insisted that it can meet the obligations.

    Minister Ramesh Pathirana has said they would try to settle past oil debts with Iran by paying them with tea. Sri Lanka plans to send $5m worth of tea every month to Iran to save “much needed currency”, The Guardian reported.

    Ministers are worried about what the future may look like and all they want is to minimise the damage.

    Central Bank Governor Ajith Nivard Cabraal has also said that Sri Lanka would be able to pay off its debts “seamlessly”.

    Former central bank deputy governor WA Wijewardena, however, told The Guardian that there were high chances that the country would default on repayments, and that would have catastrophic economic consequences.

    “When the economic crisis deepens beyond redemption, it is inevitable that the country will have a financial crisis too. Both will reduce food security by lowering production and failing to import due to foreign exchange scarcities. At that point, it will be a humanitarian crisis,” he warned.

    The chances of Sri Lanka defaulting on loans and debts have never been high. However, when we dug up information about the finance department in the government and what the finance minister has to say about this, we found that they have a plan.

    The plan is a new and strong relief package that will try to rebalance the economic imbalance. The debt can be looked at as a secondary objective but for now, the thing that they would like to focus on is the foundation of the economy. The employees, pensioners and differently-abled soldiers are the first-hand people who will get the benefits.

    The finance minister, meanwhile, said Tuesday they have a plan in place. He said the new $1.2 billion (229 billion Sri Lankan rupees) economic relief package includes payment of a special monthly allowance of Rs 5,000 to 1.5 million government employees, pensioners and differently-abled soldiers from January 2022.

    This is by far the response of the Sri Lankan government to the crisis that the nation is facing. Let us now look at some of the major factors on why and how the economy at Sri Lanka sunk this much, the first one is the tourism setback.

    Reasons Behind the Economic Crisis in Sri Lanka

    Tourism in Sri Lanka and turmoil

    The impact of the pandemic was huge on Sri Lanka. Covid 19 has stopped any sort of travel and tourism in the country for a long time now. According to the reports of the world travel and tourism council, nearly 2 lakh people have lost jobs in the travel industry since the pandemic began and globalised.

    The loss of foreign revenue is huge too. According to the Hindu report last year, forex reserves have dropped from $7.5 billion to $2.8 billion, which is a steep decline and is obviously not healthy at all. The loss of foreign revenue from the sector has been substantial.

    Adding to the above-mentioned deficits, the Sri Lankan rupee is depreciating too. This is known as inflation and it is very high in Sri Lanka right now. Basic livelihood items such as food items’ prices have risen manifold and people have to face difficulties to meet both ends. The nation, for now, has to depend heavily on imports.

    Food Shortage in Sri Lanka

    Photos of Lines and queues of people can be seen all over the news from Sri Lanka. These are the lines of people who are in a queue to buy home essentials, like food items. Prices of such basic items have risen enormously and are out of reach for many. Prices of bread, rice, wheat, sugar etc., have all risen several times.

    People standing in Queue in Sri Lanka
    People standing in Queue in Sri Lanka 

    It has never been hard for poor and middle-class people to buy items like these. The daily wage earners especially are affected the most.

    Quoting a man who works as a chauffeur in Colombo, The Guardian report said he has now taken up a second job and his family now eats two meals every day, and not three. He said his village grocer now makes ten 100g packets out of a 1kg milk powder packet because no one can afford to buy the full packet.

    The pandemic has just more severely affected those in the nation. The government’s efforts to make Sri Lanka ‘100% organic’ is at a loss. Last year, The Hindu reported that the country is planning to cut the use of chemical fertilisers to almost zero. To which farmers opposed and replied that this will affect food production. Pandemic made the food situation of Sri Lanka more severe.

    “The government has no money for fertiliser subsidies. Many of us farmers are reluctant to invest money because we don’t know if we will make any profit,” A farmer was quoted as saying.

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    Sri Lankan Government Response to Crisis

    At the time of crisis, everyone hopes high from the government and the people of Sri Lanka are hoping the same from the government there. Speaking at the parliament in December 2020, MP, Harsha de Silva said that the only solution to the crisis is to seek assistance from the IMF(International Monetary Fund). He said homegrown solutions would not help, and only the IMF can revive the country’s economy.

    The president’s office did not have an official notice or announcement for the citizens and the central bank is appealing for the foreign currency. The government of Sri Lanka is hustling to make things better for the people but it is just too hard. They are trying to stabilise the situation and try to help poor and sick people first and apply that others have to sacrifice a little.

    The central bank had earlier last year prohibited traders from trading more than 200 Sri Lankan rupees for a single US dollar, they also have stopped traders from entering into forwarding currency contracts. The government has since been taking temporary relief measures to ease the situation.

    Early December, Finance Minister from Sri Lanka Basil Rajapaksa visited neighbour India and commenced talks with his Indian counterpart Nirmala Sitharaman and India’s External Affairs Minister S Jaishankar to which they were thinking to take forward.

    Basil Rajapaksa with Nirmala Sitharaman
    Basil Rajapaksa with Nirmala Sitharaman

    The talks included a total of $1.9 billion of assistance for the country and besides that, a $500 million credit line for fuel and $400 million swap was discussed too. Similar talks were also held with China and Bangladesh.

    Of all the reliefs and grants, Rajapaksa, (The President) assured that the relief package would not contribute to further inflation and that there won’t be any new taxes.

    India’s Relations with Sri Lanka and the Assistance

    India has always been a healthy and supportive friend to its neighbours. One of the neighbours of the Indian subcontinent is Sri Lanka. Speaking of help and assistance from India, the news is flooded with nice gestures from the Indian government for the Sri Lankan government. Let us have a look:

    India assured Sri Lanka of its support to ally over these “difficult times” even as it welcomed the Trincomalee tank farms project saying it will augment bilateral energy security.

    External Affairs Ministry Spokesperson Arindam Bagchi, when asked at a media briefing on the possibility of India extending the credit line to help Sri Lanka overcome its economic crisis, said it has always stood by the people of that country.

    It is a great hope to notice how countries are helping each other in such times. India has agreed to mostly increase the credit line and time for repayments for Sri Lanka. Decisions like these will help foster friendly relationships with neighbouring countries.

    After a telephonic conversation with his Sri Lankan counterpart, External Affairs Minister S Jaishankar said India will support Sri Lanka in “these difficult times”. “Greeted FM G.L. Peiris of Sri Lanka in the New Year. A reliable friend, India will support Sri Lanka in these difficult times. Agreed to remain in close touch,” Jaishankar tweeted.

    “We have seen reports that the Sri Lankan Cabinet has approved the development of the Trincomalee tank farms. Energy security is an important area of our bilateral cooperation with Sri Lanka,” he said supporting relations with the neighbour.

    The Sri Lankan government replied that after analysing the three existing agreements with the Indian government about the strategic Trincomalee oil tank complex, usually known as the Trinco oil tank farm, the two countries have reached an agreement to implement a joint development project to make

    On the query on extending the credit line time by India, Bagchi referred to the visit to New Delhi by Sri Lankan Finance Minister Basil Rajapaksa last month.

    “He briefed the Indian side on the economic situation in Sri Lanka and his government’s approach in addressing these challenges. India has always stood by the Sri Lankan people and Sri Lanka is an important part of our neighbourhood first policy,” Bagchi said relying on support to the island.

    The above dialogues and discussion proved that India was ready to help Sri Lanka. Therefore, after mutual agreements and deals that were beneficial for both the countries, India extended a relief fund of $1 billion to the present Sri Lankan government. This was a good move indeed and helped Lanka in its time of need. However, after the March relief extended by India, Sri Lanka is again seeking for an additional credit line of $1.5 billion on top of the earlier funds. This credit line will also be met by India, which will be used by Sri Lanka for the import of its essential goods like rice, flour, sugar, pulses, medicines and more, as far as the Reuters reports go.  

    The help, extended by India, will undoubtedly be beneficial for the economically devastated Lanka and will further help in bettering the relations between the countries. India always proves that it is very much ready to help out everyone and set an example of moral duties for onlookers.

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    Conclusion

    It is not that the nation of Sri Lanka has found this issue very sudden, but that the country is experiencing it for quite some time now, which is more worrying. It has been two years since the pandemic started and globalised but the foreign reserves at Sri Lanka were depleting long back and it only shows some leniency. The tolerance of the Sri Lankan government can be detained in the present crisis as a reason for the same.

    India, as a supporting country, has always been together with other countries who are in need. It plans to do the same this year too, even when the shadows of the pandemic are hovering above still and India itself needs support. It is time that every country follows the same rules and morals so that the world can be a happier place to live in. The pandemic has massively accelerated empathy in the world and whatever lies ahead, we can feel a sense of togetherness.

    FAQs

    Why is there an economic crisis in Sri Lanka?

    The economic crisis that Sri Lanka is currently undergoing points to a severe depreciation of the country’s foreign exchange reserves. The crisis started back in 2019, when there was a massive dip in the country’s overall produce, which declined by 50%. Then the Covid19 pandemic struck, which made it insanely difficult for the country to recover, followed by a ban on import on March 2020. Now, the struggle of the country is real, with debts piling in and the government requesting relief funds from the other countries to import the essential goods.

    How much does Sri Lanka owe the world?

    The national debt of Sri Lanka is around $51 billion, as of March 2022.

    Is Sri Lanka in an economic crisis?

    Yes, Sri Lanka is facing its worst economic and debt crisis, which started in 2019 and is continuing even now!

  • Retrenchment Strategy: What Is It? | Types of Strategy | Companies That Employed It

    Businesses run on the three basics, Men, Money, and Machinery. If you are in a situation, facing loss. You will want to keep your head above the water. Devise a good strategy. Take some steps to look for what it is that has got your head into deep waters.

    What is it that has made you stand in this position of loss?

    You can analyze a lot of factors and make certain important decisions now.

    • What is it that you can let go of?
    • Is this important to you right now?
    • Can this help you improve?
    • Cutting this off will help you get out of this position?
    • Is it effective?

    How does an organization cut down costs and increase their revenue?

    Cutting down costs on activities that do not profit businesses means also cutting down the number of men in that sector. For example, if there is no longer a need for you as an organization to focus on the clerical department. You will have to eliminate the people working there, which will efficiently reduce the cost. It includes shrinking of a business or a part of it to enhance the overall performance.

    The decisions you make have to be realistic and achievable. So, Lets look at What is retrenchment strategy and the companies that employed the retrenchment strategy.

    Retrenchment Strategy – What is it, When is it employed and Why is it employed?
    Types of Retrenchment Strategy
    Pros and Cons of Retrenchment Startegy
    Companies That Employed the Retrenchment Strategy

    Retrenchment Business Strategy

    Retrenchment Strategy – What is it, When is it employed and Why is it employed?

    As it is a matter of finance, capital and investments are basic that let your organization keep going. Revising the basics: money, machinery, and men.

    So, What is a retrenchment strategy?

    The strategy includes the desertion of products and services that are no longer needed by the business.

    When is the retrenchment strategy employed?

    It is implemented when a company is facing financial issues. It is a corporate strategy, which is done by reducing an organization’s expenditure.

    Why is the retrenchment strategy employed?

    • To shift focus on activities from where revenue is generated and hence increase profits or simply because the operation, project, the service, product or the product line going on in the organization may not align with the core of the business.
    • To eliminate unnecessary costs that incur.
    • To ensure financial stability in the organization.

    Who employs the retrenchment strategy, and where is it used?

    The organizations use it on a linear or a collective basis. It is used in

    • Corporations
    • Startups
    • Companies
    • Businesses

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    Types of Retrenchment Strategy

    Retrenchment Strategy Types
    Retrenchment Strategy Types

    This is also applicable to line extensions, operations, and projects that are being carried out in your business. First, let’s take a look at the three main types of retrenchment strategies:

    1. Turnaround strategy

    It is also called management measurement. The turnaround strategy is used when a business wants to improve its performance and decrease negative trends.

    This strategy is used when the business might be facing:

    • A decline in the market shares.
    • Decrease in profits.
    • The issue of spending more money as an organization during a specified period.
    • Worsening debt-equity ratio.
    • Negative cash flow.
    • Decline in sales.

    2. Divestiture Strategy

    The divestiture strategy is adapted for when the turnaround strategy fails to yield results for a business. The divestment strategy analysis mainly the profit and profile factor. In an organization, the departments, products, services, or divisions are analyzed. Keeping in mind one question: Does this profit us? If not, then the company will let go of it.

    This strategy is used when the company might be facing problems like:

    • Not being able to keep up with the competition in the market.
    • Facing negative cash flows.
    • The business started or acquired does not match the core values of the company.
    • When a tech upgrade is needed and the company is unable to do so.
    • It is struggling to survive.
    • The company might be running a business that is not profitable to the company.

    3. Liquidation Strategy

    This is the arrival of a business at its last stage. When no other options are available, the company sells all of its assets. As ugly as it might be, it involves total shutdown of a firm and will attract negative reactions as it also leads to consequences majorly including unemployment, of the people who worked there. Which also creates a bad reputation for the company.

    To understand this more clearly, let’s take the Tata group as an example. It is a highly diversified entity with a range of businesses under its umbrella. A lot of which did not align with the identity of their core business.

    The businesses that Tata ran for a specified time were soaps, detergents, pharmaceutical companies, and cosmetics. All of which were identified as non-core by the Tata group.

    • TOMCO (Tata Oil Mills Company) was divested and sold to Hindustan Lever Limited. The company was sold to Hindustan Lever, as it was non-competitive and would have required substantial investment for them to sustain it.
    • Tata’s Merind were divested to Wockhardt.

    Adapting a retrenchment strategy might also be a company’s response to a significant reduction in demand for the product, product line, or the service it provides. Which would also include dropping off from the market.

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    Pros and Cons of Retrenchment Strategy

    Here are the Pros and Cons of Retrenchment Strategy:

    Pros

    • It can layer, simplify, and flatten the organization’s structure.
    • Prove, cost-efficient, and improve performance.

    Cons

    • It will create a negative image and reputation of a company.
    • Criticism and backlash from society.

    Companies That Employed the Retrenchment Strategy

    A list of 10 organizations that have adopted the retrenchment strategy for various reasons, overall enhancement and to run the organizations in their companies efficiently are:

    1. Tata Group
    2. Infosys Ltd.
    3. Wipro Ltd.
    4. Tech Mahindra Ltd.
    5. HCL Technologies Ltd.
    6. Cognizant Technology Solutions Corp.
    7. Capgemini
    8. Air India
    9. Dell
    10. Ford

    FAQs

    What is a retrenchment Strategy?

    A retrenchment strategy is a business strategy that includes the desertion of products and services that are no longer needed by the business.

    What is a retrenchment turnaround strategy?

    A retrenchment strategy is when an organization feels that the decision made earlier is wrong and needs to be undone.

    What are the three retrenchment strategies?

    The three types of retrenchment strategies are:

    • Turnaround strategy
    • Divestiture strategy
    • Liquidation strategy

    What are retrenchment strategy examples?

    Some of the examples of a Retrenchment Strategy are:

    • Selling Assets
    • Abandoning Markets
    • Decreasing Production
    • Downsizing
    • Outsourcing

  • How To Build Your Company Ready to Manage Any Crisis? (5 Steps)

    Crisis management is a method that can be used for two purposes: as a way to help the contractor deal with a crucial problem that could cause severe losses; and also as a form of prevention against any type of crisis, preparing the company to deal with this situation.

    In other words, this methodology brings together a set of strategies and actions aimed at minimizing, reducing, or reversing the possible consequences of these problems, which can range from economic to those related to the organization’s image.

    But after all, what exactly characterizes a crisis?

    According to a communication and crisis expert, this concept describes any serious event that breaks the normality of a company or causes an extremely formal impact, causing serious damage and even affecting people’s safety and lives.

    Companies must always be prepared to give a quick and effective response in these situations, and for that, the first step is to know the main types of crisis that can affect your business.

    What is the Origin of a Crisis?
    How to Manage a Crisis in a Company?
    How can HR Help in Crisis Management?
    FAQs

    What is the Origin of a Crisis?

    Every company can be affected in different ways, there is no single source and in each of them, the answer must be as assertive as possible. Therefore, it is important to know the main cause of the crisis in the corporate world so that you can adequately prepare for each one of them.

    Check out this brief description of the main causes of the crisis:

    Economic or Financial:

    One of the most common types to be seen, and occurs is when the company suffers a significant reduction in its business. When there’s more supply than demand, your profitability and revenue decline, and your cash flow or working capital isn’t enough to balance the bills.

    Structural failures:

    Structural failures are most often seen in large companies such as factories and construction companies. They are characterized by the failure of equipment or structures. In more serious cases, damage to families can result in the loss of life.

    Rumours of sabotage:

    Many rumours or accusations spread by competitors or even dissatisfied customers can cause significant crises in organizations, especially when spread quickly through technology and social media.

    Reputation:

    When internal and confidential information leaks to society, every company is at great risk of facing a severe crisis, especially if this data involves illegal issues about its operation.

    Natural disasters:

    Natural disasters like earthquakes, storms, floods can damage your business, causing operational and, consequently, financial problems.

    With these examples, we can see how there is a great diversity of causes that can lead to a business crisis, whether internal or external. But don’t worry, we will give you fundamental tips, later on, to help you with this management.

    How to Manage a Crisis in a Company?

    There is no denying the importance of having good crisis management, but the big question that makes this process difficult for many professionals is: where to start?

    Assertive crisis management must be organized and prepared with great care, which is why we have created a step-by-step guide that can help your company with this task. Check out:

    1. Map the Company’s Risks

    For your company to have good crisis management, it is necessary to carry out a complete mapping of all the company’s risks.

    Raise the entire history of the organization and analyze the main issues that could affect it. It is important to simulate these possible scenarios to have a better understanding of what could happen and, based on that, devise the best strategies for each situation.

    2. Create a Crisis Committee

    Once all the risks that could affect your business are mapped and understood, the second step is to establish who will be responsible for this crisis management.

    The leaders and managers should be in front of this command-line process, but beyond them, you have to define representatives from each sector of the company, who will also be responsible for dealing with problems that reach their respective areas.

    After all, the crisis can affect the organization as much as a specific sector, so it is important to have an employee responsible for this task in each team.

    3. Strategy Elaboration

    Strategy Elaboration
    Strategy Elaboration

    Then, it is time to devise the strategies to be used in each crisis.

    Establish the actions that will be taken, train the spokespersons responsible for each team, and analyze how information about the event will be transmitted, both internally to all employees and the press and the public.

    With these actions, your company will be better prepared to deal with crises and solve the problem in the best way possible. Besides them, other tips are fundamental for this process and must also be followed to avoid mistakes that could compromise this management.

    4. A Contingency Plan to Manage a Crisis

    No company wants to face a crisis, but as we mentioned above, we are often subject to unexpected situations that will drastically affect our daily lives.

    Therefore, all companies must be ready to deal with these unexpected events, not only through the strategies we mentioned above but also through a contingency plan.

    Typically, it is based on risks that have already been identified and decided upon as situations that can critically impact the company, to maintain or restore the organization’s critical operations.

    As an example, we can mention the coronavirus pandemic, which impacted and changed the routines of several organizations, forcing them to quickly adapt to this new scenario to ensure that their business continued to function.

    In situations like this, the contingency plan must be activated so that the company can maintain its operations. At this point, all teams must be aware of the actions that will be taken to resolve the crisis and work together to put them into practice.

    Good communication is essential not only for this plan but for all crisis management so that everyone is aligned on the procedures that will be taken. In addition, the organization’s response must be as quick as possible, as the longer it takes, the more difficulties can arise in solving the problem.

    Finally, it is noteworthy that this process must be closely monitored by leaders or managers so that they can be sure that the necessary actions are being taken and that the desired results are being achieved.

    5. The Importance of Internal Communication in Crisis Management

    Internal Communication
    Internal Communication

    In times of crisis, a small flaw, miscommunication or rumours can disrupt this entire process, and even bring serious consequences. Therefore, the first item that should not be dispensed with is internal communication.

    In this process, HR must be concerned with being transparent and objective about the procedures being taken, and always be available for any queries that may arise.

    Maintaining good internal communication will bring greater security to those involved, ensuring that employees are always aware of the organization’s position at these times, feel at ease, and know what is being done to fight the crisis.

    How can HR Help in Crisis Management?

    HR is one of the most important departments in the corporate world. As well as dealing with bureaucratic issues, the contractor is also responsible for a broad range of management that involves the welfare of employees. Therefore, in times of crisis, the professionals in this department are extremely important to contribute to the management’s focus on the internal public, that is, in establishing all the measures that will be aimed at the company’s employees.

    These actions provide high-performance management, which will not only increase the teams’ performance but also contribute to greater motivation and, consequently, better crisis management.

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    Conclusion

    Managing a crisis is not an easy task and requires a series of components to be able to minimize the consequences, such as good planning, preparation, and leadership from everyone involved.

    Therefore, in this article, we explain the main crisis that can affect your business and offer tips on how your company should prepare to face these moments.

    We hope that it will help you in developing a great crisis management system for your company.

    FAQs

    How do Companies Manage Crisis?

    To manage crisis companies should develop a crisis management plan by assembling a crisis management team and ensuring strong leadership and training the employees.

    How do you prepare for crisis management?

    The company should be prepared for the crisis by recognizing a potential crisis, checking the crisis readiness, researching your company records, reviewing your social media status, building the image of key leaders, strengthening your key relationships.

    What are the six steps of handling a crisis?

    The six stages within every crisis are warning, risk examination, response, management, resolution, and recovery.

    What are the three stages of crisis management?

    The management of crisis can be divided into three phases are pre-crisis, crisis and response, and post-crisis.

  • How to Decrease the Chances of your Startup Failure?

    The average life of a global enterprise is usually just 2 years; most of them fail and cannot survive after this time, due to different factors. Among them, we can find financial lack of control, bad administration, and a little vision to take them into the future. In the next top 8, we will be able to give you some tips to prevent your business from failing and even to boost it.

    1. Research the Market
    2. Take Care of Finances
    3. Set Goals and Objectives
    4. Identify Areas of Opportunity
    5. Find the Differentiation
    6. Attract Customers Constantly
    7. Startup Costs for Starting your Business
    8. Working the “Fear” of the Risks of Starting a Busines
    FAQs

    1. Research the Market

    Researching the Market
    Researching the Market

    Researching the market is probably the number one step that every entrepreneur or business owner should take. This is as such a tool applied through surveys, evaluations, and file information, which allows knowing the real needs that consumers have, their tastes, preferences, and profile.

    It should be done in order to know how the competition develops, what customers are they looking for and the opportunities they have to be a strong company. By having this information very well-identified, viable business models can be created and adapted, which by themselves are already promising for the future.

    2. Take Care of Finances

    Take Care of Finance
    Take Care of Finance

    The administration of financial resources is very important to be able to support the entire business and prevent it from falling. The rules that must be followed include the constant review of the financial statements, the measurement of expenses and income, and taking into account the need for financing at some point.

    In other words, every business that wants to accelerate its growth needs to obtain sufficient financial resources to achieve it. In one of the reports on credit and growth, we learned that only 40% of entrepreneurs focus their resources on strategies that can create long-term value.

    3. Set Goals and Objectives

    Set Goals and Objectives
    Set Goals and Objectives

    It is important that you adhere to the business plan that you created, in order to have the goals and objectives established and to know where it is necessary to direct your business. In other words, this helps you know what you and your team need to do in order to take the company to the next level.

    You can follow work methods in which everyone knows and defines their tasks to fulfil them on an estimated date, and thus obtain the improvement and growth metrics they are having.

    4. Identify Areas of Opportunity

    Identify Areas of Opportunity
    Identify Areas of Opportunity

    Identifying the areas of opportunity is the only way in which a business can improve and be more likely to continue operating and attracting customers. Ideally, you should constantly get feedback from your customers, to know what your service is like, the quality of your product, or even what they need.

    You must identify those aspects within the business that need to be improved, for example, manufacturing, administrative, or even maintenance processes, and think about how you can improve them.

    5. Find the Differentiation

    Find the Differentiation
    Find the Differentiation

    One of the very important qualities that prevent a business from failing is its differentiation. By offering something totally innovative that makes the business stand out, it is possible to attract an endless number of clients and consumers who wish to satisfy any need.

    Companies that manage to be disruptive stand out from their competition and even manage to change the development of their industry. In Latin America, different businesses have been created that start from being SMEs to achieving a big breakthrough.

    6. Attract Customers Constantly

    What makes a business work, in addition to finances, are the clients since they are the source from which the capital is obtained so that everything continues. There are different ways to attract them, for example, digital presence, different sales channels, advertising on social networks, and other marketing strategies that you can adapt to the vision of your business.

    At this point, we recommend that you must know very well the profile of your clients/consumers and that your efforts really serve and turn into sales.

    7. Startup Costs for Starting your Business

    In addition to infrastructure and personnel costs, it is necessary to take into account the costs of setting up the company itself. The main expenses to start a business are the fees of the Board of Trade and the issuance of the permit, if applicable, in addition to others that vary between states.

    The total cost by traditional means can vary from R$700 to R$2,000. However, the facilities of the internet already influence these processes and the costs to start a business online may be lower than that.‌‌

    8. Working the “Fear” of the Risks of Starting a Business‌‌

    Working the Fear of Risks
    Working the Fear of Risks

    One of the biggest fears faced by the entrepreneur is making mistakes and, consequently, losing the money and time invested. Among the risks of starting a business, this one stands out. This fear usually arises from insecurity in making some important decisions that involve risks. The tip is: take risks, even though you are going to make mistakes. You might take wrong decisions and will make a lot of mistakes but this is natural.‌‌

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    Conclusion

    It is estimated that out of 1,000 businesses, 800 fail in the initial stage of growth due to their negligence towards several crucial factors. Therefore, by following the above tips, you can increase the chances that your business will continue to develop in the market.‌‌

    FAQs

    What is the most common cause of failure for a startup?

    The causes for startup failure are money running out, lack of research/being in the wrong market, ineffective marketing, bad partnerships, etc.

    Why do 90% of Startups fail?

    The major reasons behind the startup failure in India are lack of motivation, lack of funds, lack of focus, lack of agility, business model failure, etc.

    How can startup failure be avoided?

    The startup needs to be updated with the technology and the software that they are using. All the members of the company should communicate, motivate and channelize the energies of the team to be successful. By following this we can avoid startup failure.

    What happens when Startups fail?

    When startups fail they would apply those payments to any outstanding debts, liquidate assets to pay debts. In many cases venture, capital investors, and other investors will end up with the loss.

  • Why is Ford Motors closing down its Manufacturing Plants in India? [Case Study]

    The Indian automotive industry was left with even fewer brands as Ford Motors departed from the Indian markets on Friday. The motor giant had announced its decision to shut down all local manufacturing facilities on Thursday.

    The unpleasant news meant worse for car dealers and the company’s employees as this would affect them in the long run. The manufacturing plants will continue to operate until 2022 for the sole purpose of manufacturing export vehicles. This means their models for the Indian Market such as Figo, Aspire, Freestyle, EcoSport, and Endeavour will no longer be produced.

    For those who have kept track of the auto market, this shouldn’t be something too surprising. Ford is the most recent automotive brand to leave the Indian markets as we’ve seen with Harley Davidson, Chevrolet, and Fiat before. Did all these brands leave for the same reasons or did each of them have their own barriers that stopped them? We’ll take a deeper look into what drove Ford Motors to make this difficult decision.

    What went wrong with Ford?
    The Future of Ford in India
    FAQ

    What went wrong with Ford?

    Ford’s been in the Indian market since 1995, although the company had begun its initial days back in 1926, it had come to halt due to severe import restrictions enacted at the time.

    Ford had resurfaced as Mahindra Ford India Limited (MFIL) a joint venture with Mahindra & Mahindra Limited. The company was then renamed to Ford India Private Limited. Further down the lane, we got to see some of the most iconic cars released by Ford such as the Ikon and Mondeo Mk3.

    There are a few reasons that have contributed to the company’s decision to stop dealing in the Indian market. The decision was bold and calculated to ensure the long-term profitability and sustainability of the company.

    Poor Sales Conditions

    Consumers have always loved Ford but the Indian auto industry as a whole is going downhill. This is rather something to do with how the market is performing and isn’t specific to the brand.

    People have a variety of options available in the market and this has reduced the company’s demand in the Indian market over the years. It’s rather clear from the numbers that the company wasn’t getting any better in terms of market share over the years.

    Ford's falling market shares
    Ford’s falling market shares

    Furthermore, the pandemic meant that fewer people are buying cars which just added to the company’s declining profits in the country.

    Immense Losses

    Ford has lost more than $2 billion over the last 10 years in India. Although models such as the EcoSport had sufficient sales, it wasn’t enough to be considered profitable for the company. Based on how the company operates in India, it’s worth considering the $0.8 billion spent in 2019 just for operations.

    Ford has tried to incorporate global standards for its manufacturing plants and operations alike. These may have been a little too expensive for the country and cost them more money than the potential profits.

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    Broken Joint Venture with Mahindra

    The tie-up between Ford Motors and Mahindra has allowed the company to produce new cars faster and with less investments in the past. The joint venture formed in October, 2019 meant Mahindra was owning a 51 percent controlling stake and Ford owning a 49 percent stake.


    The companies were to cooperate specifically for the co-development of 3 new SUVs and an electric vehicle. But this was not to be, as the partnership was called off in December, 2021. The reasons for this were apparently in the best interests of both companies although there is no official statement.

    Ford's joint venture with Mahindra & Mahindra in October 2019
    Ford’s joint venture with Mahindra & Mahindra in October 2019

    This also means that the upgraded version of Ford’s EcoSport which was to feature Mahindra’s 1.2-liter direct-injection turbo-petrol engine will not be released later this year. The declining sales meant that Ford was relying on the partnership as well as the new SUVs to keep them afloat. The formal end of the joint venture has left the company in a rather difficult position.

    The company was forced to make a choice that would have a deep impact on its future profits. Ford makes more money in other countries like the United States where it’s still able to get sales and keep pushing more expensive cars to consumers.

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    The Future of Ford in India

    To those of you who might be wondering if this is the end game for the company, it certainly isn’t. Ford Motors isn’t leaving India, rather it has put a stop to all manufacturing of local vehicles. The manufacturing plants in Chennai (Tamil Nadu) and Sanand (Gujarat) will be shut down in a phased manner. As of right now, these will still be used to manufacture export vehicles and parts.

    Ford has always provided great customer support. The company promises to keep providing existing owners with the same care and support regardless of their decision. As mentioned by Anurag Mehrotra, president of Ford India, car owners will still have access to spare parts and services through local dealers and customer support if it’s needed for any reason.

    As per the company, service will be provided to Ford owners all across India
    As per the company, service will be provided to Ford owners all across India

    As for resales, you might not get as much value as expected. This is the same for any motor brand that isn’t operational in the country anymore. While this is true, cars like the EcoSport are still a good buy if you aren’t too paranoid about the resale value and just want a great car at an affordable price. Service and parts will be provided by Ford as previously mentioned, meaning that getting a Ford car in 2021 can be a satisfying deal if you choose to.

    Ford still plans to serve the Indian market in the form of global imports. Popular global models such as the Ford Mustang will be available to consumers in the form of imports. This just goes to show how desperate the company is to stay operational in the country and how the decision was made purely to ensure the sustainable future of the motor manufacturer. Ford had tried reaching out to multiple manufacturers trying to ensure another joint venture but unfortunately, none have worked out for varying reasons.

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    Conclusion

    Ford’s recent move isn’t very pleasant considering the 4,000 employees who just lost their job. Regardless, the company has made its mind and taken a decision that will aid their benefits. Ford plans to bring more international cars to India and we’ll have to wait and see how things turn out.

    The Indian automotive industry and car enthusiasts alike are sure to miss the brand. But as things are in motion the best we can do is watch out for some great deals for used cars and hope that Ford Motors stays on Indian grounds in the future.

    FAQ

    Why is Ford shutting down its manufacturing plants?

    Ford is shutting down its operations in India as it has lost more than $2 billion over the last 10 years in India.

    Is Ford Leaving India?

    No, Ford will shut down its manufacturing plants but Ford owners will still have access to spare parts and services through local dealers.

    Will Ford support the existing customers?

    Yes, as mentioned by Anurag Mehrotra, president of Ford India, car owners will still have access to spare parts and services through local dealers and customer support if it’s needed for any reason.

  • Shell against Recession – 11 Ways to make your Startup or Business Recession Proof

    Making one’s startup recession-proof is not a quick switching activity. It is a process. Ignoring it on regular days isn’t the ideal way. During the downturn of the economy, it might be too late to control or even preserve the existence of the business.

    This ‘R’ word is always a nightmare to business owners be it big or small. However, if the mechanism against recession is designed wisely, a business can be running smoothly, whatsoever the conditions might be.

    Here’s the enchiridion to a recession-proof startup. Hard work counts along with a witty application of needed aids. Here’s the one-stop solution to make your startup recession-proof at any time and every time.

    Cut off unnecessary expenses
    Find Costless ways of advertising
    Buy Old or Rent Furniture for Office
    Clear off your Debts on Time
    Build a loyal Customer base
    Have a Clear objective
    Make/Build Durable products
    Don’t add/purchase extra or unnecessary products and services
    Invest wisely in adaptable technology
    Hire a Financial Planner
    Development Should be your Priority
    FAQ

    Cut off unnecessary expenses

    Cutting off unnecessary expenses is always a plus for businesses. Look for ways to reduce the round expenses along with operational costs. New product launching should be held back for favourable situations only. Unless needed urgently, new employment shouldn’t be entertained.

    Investing in new products, for “experimenting” is not a positive aspect while making your startup recession-proof. To enable the smooth running of a business even during a recession period, cost controlling, is very important.

    Find Costless ways of advertising

    Cheap or costless ways of advertising is again a savings-friendly method. Guerilla marketing is one of such techniques which is cost-beneficial yet effective. For example, If an ice cream shop opens in town, they give free ice creams to their first ten buyers for the first week. This doesn’t hamper their profit much as there will be way more customers than usual in order to be one of the first ten. However, there are more ways to advertise without sinking a penny.

    Buy Old or Rent Furniture for Office

    Run-on tight budget in the beginning. Buying old furniture and decors for office, hiring only the necessary number of employees is to start with.

    Clear off your Debts on Time

    Clearing off debts on time is one of the very significant factors, affecting the cost management of a business. Avoid opting for high payoff debts in the first place. Such debts slow down the ability of the service of the startup to meet the debt itself. Debts should be paid off immediately or they should be lesser in the count and lower in amount.

    Staying in good communication with investors and stakeholders are very important too. The business or any operation that is not running in profit should be sold.

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    Build a loyal Customer base

    Build a Goodwill in the existing customer base. Invest in bigger and regular clients than investing in matters to attract new customers. Allow discounts to regular best customers. When they will receive the best experience and end results from you, they will be interested to work along with more and will be a source of advertisement to attract new customers.

    Have a Clear objective

    Having a clear objective is very important to build your business recession-proof. You either focus on cost leadership or quality differentiation. You choose anyone and don’t hang in the middle. This will enable you to hold on to your customers even while there’s an economic recession. This displays and retains loyalty.

    Especially for smaller startups, there’s no need of being everything at once. Find your specialization and master it to thrive in even the worst market situation. This is because if you build a good customer base, you’ll still have your business running because of them even during the economic downfall.

    Make/Build Durable products

    Startups should focus on necessity, durability and eligibility. Since startups are replicable businesses, they aspire more to follow them. They should be durable, and day to day usable. To make sure even during the recession period of economy, your product should have its demand intact. The products should be durable too otherwise they cannot gain customer’s confidence.

    Don’t add/purchase extra or unnecessary products and services

    Diversification is not the right way. Adding extra products and services to your offering doesn’t make it any different. It just increases the wastage of money simply. Startups must promote unique and different products not unique and different products’ additionals. Begin with a useful and unique product in the first place.

    Invest wisely in adaptable technology

    A wise investment in adaptable technology saves a lot of hard work and unnecessary expenses. Like an online meeting with a client can easily save a lot of expenditures. If a single machine can replace numerous labourers, it should be put to use immediately. This would save cost when there’s a high demand for labourers and their cost is high, it will hardly bother you!

    Hire a Financial Planner

    Hire a financial planner to track your monetary activity very well. A professional can help you and your business with cash flow, expenses and savings so that your business finance is in your control even during a recession period.

    Development Should be your Priority

    Development should always be your priority. When business is strong, most people leave it loose waiting for instances of downfall. No matter how strong a business is, ways of development should always be monitored. Development designing controls the future prosperity of one’s business. Also when a business is slow, action plans should be implemented to restore the conditions.

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    Conclusion

    However, startups can never be made 100% recession-proof. Business is all about ups and downs. Such measures can ensure the survival of a business through hard times of recession and maybe ensure profit-making out of such times to some extent. The startup owners analysis and experience are also the keys to a recession-proof startup.

    FAQ

    What products are recession proof?

    Nutrition products, Home and cleaning essentials, Inexpensive entertainment, Pet care essentials, Food and beverages and baby products are some products which are recession proof.

    What is the best recession proof business?

    The food and beverage industry is one of the most recession proof industries due to the fact that everyone still needs food and drinks to live.

    What companies suffer most in a recession?

    Retail, restaurants, Hotels, Automotive, Oil and gas, Sports, Real estate, and many others Industries see heavy declines during times of recession.

  • The Curious Case of Africrypt | How Africrypt leveraged Bitcoin popularity to operate a scam

    Cryptocurrencies have a separate fanbase that loves to mine, possess and trade in them. Ever since bitcoin, the open-source software, was released as the world’s first cryptocurrency, the era of this new form of digital currencies began.

    The craze of cryptocurrencies is nothing new and is the drive that is increasing more than ever, pushing this generation of people towards possessing more of them. And why would it not be there?

    Bitcoins and other cryptocurrencies have been well-known to offer healthy amounts of profits and with the adoption of these currencies as payment methods by organizations like Square (SQ), CashApp, Venmo, and the latest by PayPal, the cryptocurrencies are scaling new heights.

    Furthermore, these currencies are also beginning to act like safe-haven assets.

    Cryptocurrencies were relatively new in the past but with the turn of the last decade, they have been growing in popularity like never before in all the major countries of the world.

    However, this new scam involving cryptocurrency in Africa is to put legions of people around the world in doubt where the founders of the African bitcoin investment and exchange company, Africrypt, vanish into thin air along with all their investors’ money!

    What is Africrypt and How it Started?

    Africrypt is an African cryptocurrency firm founded by Raees Cajee and Ameer Cajee. This company was established in 2019 by the two brothers, aged 20 and 17 years respectively, and aimed at providing bumper returns to their investors.

    Soon after the company started its operations, it began to quote exceedingly profitable returns to its investors, which was allegedly at 10% per month. However, not a single person was to raise any questions with regards to the same until the case where the founders took flight occurred, to the shock of all of them.

    With the New Year Came New Signs of Troubles

    The investors were getting a palpable profit and that’s what helped them go further with Africrypt.

    There wasn’t a single instance where they felt insecure even amidst the pandemic, until the month of April 2021, when the company’s CEO Ameer Cajee informed the clients that the company was struck by hackers.

    He further implored them not to inform the lawyers and other legal authorities to take any steps because that would result in slowing down the recovery process of their money.

    This aroused the suspicions of many of their investors, who immediately roped in the law firm, Hanekom Attorneys along with another group to start with the liquidation against Africrypt. However, the suspicions were only meant to stay.

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    Scam Alert!

    Africrypt, which was otherwise deemed to be a profitable and reliable venture, revoked its employees‘ access to the back-end platforms. This added more panic to the anxiety that was already ripe and then, after seven days, it completely vanished untraceable along with bitcoins that are estimated to be worth around $3.6 billion.

    What’s more shocking is that there is no single trace of the firm, its founders, and all the celebrity investors who were involved in it!

    According to the recent Bloomberg report, any calls to Africrypt, where Ameer’s mobile number was on display, are being redirected to the voicemail service.

    The value of the bitcoins saw a recent surge in the past year and with the loss of 69,000 coins through Africrypt, which would have amounted to 4 billion dollars in April, would represent a huge loss, and in fact, one of the biggest cryptocurrency scams in recent times.

    Bitcoins and their traders are witnessing enormous losses and most of them in recent years are incidentally with the companies based out of South Africa. It was only in 2020 that the South African Bitcoin trading company, Mirror Trading International led to the loss of 23,000 cryptocurrencies, which amounted to around $1.2 billion and was reported as the biggest scam involving cryptocurrencies. However, with this latest Africrypt scam, losses are predicted to be three times as much.

    Looking at the Latest Proceedings

    Hanekom Attorneys, the Cape Town-based law firm that the investors approached fearing the hack, initially worked for the liquidation against the company. However, as the case took a new turn after the disappearance of the founders of Africrypt, they were unable to locate the brothers but have already informed other crypto exchanges requesting a quick revert in case they make any attempts to convert the digital coins.

    Furthermore, Hanekom has further escalated the matter to the Hawks, an elite branch of the South African police force.

    According to the reports, the coins with which the company has vanished were untraceable because Africrypt has already transferred its share of pooled funds to tumblers and mixers or other large pools of bitcoin.  

    While the founding brothers’ mobile phones and other numbers are being redirected to the voicemails, calls seem to be pouring in on the phone number of the cousin of the Cajee brothers, Zakira Laher, who was also a former fellow director of Africrypt. The investors, police as well as the media are seemingly calling her for updates regarding the scam.

    Laher, who has a week-old baby at their residence, is scared of the situation that the brothers left their family in and is exceedingly worried about the safety of her family. Speaking about the position that she used to hold at Africrypt, Zakaria mentioned that her designation was peripheral and she didn’t gain anything out of the same.

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    Why is the Investigation of Cryptocurrencies Difficult?

    Though the investigation is in progress, nothing is yet to come out that disclosed any whereabouts of the founders of Africrypt or the money lost. It is quite difficult to run an investigation involving cryptocurrencies even when it comes to a scam as colossal as the present case of Africrypt.

    Brandon Topham, head of the Finance Sector Conduct Authority of South Africa said that the cryptocurrency assets are still not considered legal as financial products by the government, which is why they cannot launch a formal investigation for the same.

    Conclusion

    The cryptocurrency market has huge potential for the future, however, the road to success with these digital currencies is also fraught with frauds and losses. Besides, the latest rise in the prices of digital currencies ushered in a whole new world of risks.

    With China announcing the latest ban on cryptocurrencies after their prices soared recently, it appears to be adding to the list of other countries like Bolivia, Algeria, Morocco, Saudi Arabia, making the future murkier for these currencies.

    FAQ

    Who are the founders of Africrypt?

    Africrypt was founded by two brothers Raees Cajee and Ameer Cajee.

    When was Africrypt founded?

    Africrypt was founded in 2019 aimed at providing huge returns to their investors .

    Did Africrypt founders left the company?

    The founders of the company vanished with bitcoins that are estimated to be worth around $3.6 billion.

  • Major Companies that may Go Bankrupt during Coronavirus pandemic

    The coronavirus pandemic has pushed many struggling companies into bankruptcy. Stay-at-home orders have forced many nonessential businesses to close as the demand has fallen massively. The number of bankruptcy filings has risen sharply with little revenue coming in. According to report from American Bankruptcy Institute, bankruptcy filings have risen by 26% from last year.

    COVID-19 has led to disruptions of many industries. The economic slowdown caused by novel coronavirus has forced many startups and SMBs to shut because of the limited resources, revenue, capital and high debt prior to the pandemic. Not only this, many big companies are also gradually being pushed towards the bankruptcy.

    The result is that it has increased layoffs across many industries. Huge number of people have been laid off resulting into unemployment. For the last two months, 36.5 million people have filed for jobless benefits. This all ultimately resulting into economic crisis.

    Unable to cope with the loss, not only startups but many established firms are left with option but file the bankruptcy. The companies filing bankruptcy are mostly from aviation industry i.e. airlines, clothing lines and oil & gas companies. Some of them are big players like Virgin Australia, Neiman Marcus, J.Crew, Diamond Offshore Drilling and Whiting Petroleum.

    Here are some of the major companies dealing with the financial fallout due to COVID-19.

    Diamond Offshore Drilling

    On April 26, the contract drilling services company, Diamond Offshore filed for Chapter 11 bankruptcy. The Houston-based company provides contract drilling services to the energy industry around the globe. But it filed bankruptcy due to low oil demand and the price war between OPEC and Russia as it caused its business to decline amid the coronavirus outbreak

    Diamond Offshore has $5.8 billion of assets and debts of more than $2.6Bn. The company filed bankruptcy 10 days after it missed an interest payment on $500Mn worth of bonds and said it was working with advisers on various options for its future. The company also recently drew down $400 million under a revolving credit facility.

    In 2019, Diamond Offshore reported revenue of $981 Mn. The company had employed 2,500 workers at the end of last year. According to company’s statement, Diamond Offshore currently has enough capital about $435 million of cash on hand to continue normal operations as it undergoes restructuring efforts.

    Virgin Australia

    On April 21, Australia’s second-biggest airline Virgin Australia became the world’s largest airline to seek bankruptcy protection since the coronavirus shutdown created a debt crisis. The COVID-19 has affected the travel industry as airlines seek government due to restrictions on travel.

    Virgin Australia was rejected for a 1.4 billion Australian dollar ($897 million) government loan before entering into the Australian equivalent of Chapter 11 bankruptcy proceedings. However, Virgin Australia was struggling even before the corona crisis.  It has been suffering an annual loss for seven consecutive years.

    The company currently has debt of AU$5 billion ($3.2 billion). On the other hand, more than 10 parties have expressed interest in restructuring the company. Founder of Virgin Group and major shareholder of Virgin Australia, Sir Richard Branson stated that the company would work towards proper steps to make Virgin Australia healthy again.

    Virgin Australia constitutes share of around one-third of Australia’s domestic airline market. The company employs 10,000 people directly and 6,000 people indirectly. If the company ceased operations, its rival Qantas Airways would have a virtual monopoly.

    Frontier Communications

    On April 14, the national phone and the high-speed internet company Frontier Communications initiated its bankruptcy proceedings by filing for Chapter 11 Bankruptcy. The company announced that it was proceeding with the sale of its Washington, Oregon, Idaho and Montana operations and assets to Northwest Fiber for around $1.35 billion in cash.

    The company made its restructuring plan to reduce its debt by more than $10 billion. It has also received $460 million in debtor-in-possession financing. Frontier has more than $1.1 billion in liquidity including the company’s more than $700 million revenue in cash. Also the DIP financing will help it meet operational needs.

    With this financing, the company plans to continue providing quality service. Frontier has fiber-optic and copper networks in 29 states. The company said it had $8.1 billion in annual revenue in 2019, according to an SEC filing.

    Gold’s Gym

    On May 4, one of the most popular fitness chains Dallas-based Gold’s Gym filed for bankruptcy protection under Chapter 11 of the country’s bankruptcy code. Gold’s Gym plans to permanently close around 30 company-owned gyms but its franchised locations will reopen as coronavirus restrictions are lifted.

    The company said in a statement that the move has been taken in an effort to facilitate the financial restructuring of the company. Due to lockdowns imposed in many countries to contain the spread of COVID-19, gyms are forced to remain shut during this period. Thus, it has become difficult for them to continue their operations.

    The company expects to emerge from bankruptcy by August 1. The company said that has been a complete and total disruption of every one of their business norms. So they needed to take quick, decisive actions to enable them to get back on track. Gold’s Gym was bought in 2004 by TRT Holdings for $158 million.

    bankruptcy due to corona
    Many businesses filed for bankruptcy protection under Chapter 11 due to COVID-19

    Intelsat

    On May 13, the satellite operator Intelsat announced that it filed for Chapter 11 bankruptcy protection. The company reported almost $15 billion in debt at the end of 2019 and started struggling when it skipped a $125 million interest payment in April. Intelsat had revenue of $2.1 billion at the end of 2019.

    Intelsat provides satellite services to customers in the media and government sectors but because of because of coronavirus crisis, the company saw significant reductions in demand that eventually led to filing of bankruptcy. However, it secured $1 billion in debtor-in-possession financing to help provide liquidity during the restructuring process.

    J.Crew

    On May 4, the New York apparel company J.Crew filed for bankruptcy after struggling with declining sales and huge debt. The retailer had roughly $2.5 billion in annual sales. The company faced low demand as all its locations were forced to close temporarily to contain the spread of Covid-19.

    J.Crew tried to lower some of its debt burden by taking its more successful Madewell brand public. As part of the bankruptcy proceedings, J.Crew’s lenders will convert around $1.65 billion of its debt into equity. The retailer also secured $400 million financing from current lenders in order to continue its operations during its restructuring.

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    John Varvatos Enterprises

    Another menswear brand John Varvatos filed for Chapter 11 bankruptcy on May 6 as part of an agreement to sell all of its business and assets to British private equity firm Lion Capital. John Varvatos stated that along with the rest of the luxury retail industry, it has been greatly impacted by the negative effects of the coronavirus pandemic. The outbreak has forced the company to temporarily close its stores.

    As part of the sale agreement, Lion Capital will provide debtor-in-possession financing that will help support John Varvatos operations when combined with its projected cash flows. Lion Capital was already an investor in John Varvatos. It had purchased a majority stake in the company in 2012.

    Stage Stores

    On May 10, Stage Stores, which operates department stores under brands such as Gordmans, Bealls and Goody’s, filed for bankruptcy and is now terminating its operations. According to a company statement, it is looking for potential buyers of its business and assets,

    Earlier Stage Stores struggled with competing against large-scale retailers as well as e-commerce sellers. Then, the pandemic burdened the retailer by causing Stage Stores to temporarily close all of its 738 locations. For reconstruction, the retailer is now in the process of beginning to reopen stores to conduct liquidation sales.

    Stage Stores operates the chains in mostly rural areas across 42 states. The company had roughly 13,600 full-time and part-time employees as of February 2019 and reported revenue of $1.58 billion in sales in the last fiscal year.

    True Religion Apparel

    On April 13, True Religion Apparel, an American denim retailer, filed for Chapter 11 bankruptcy for the second time in less than three years. The company has struggled in recent years with competition from other retailers. With the retail industry hard hit by the coronavirus, True Religion stated that simply could not afford to wait out the financial instability and stay-at-home restrictions.

    ABL and Term Loan are the company’s largest lenders. They are providing more capital to help with its restructuring. True Religion had assets and liabilities ranging from $100 million to $500 million. Until its stores open up, the company plans to continue focusing on its e-commerce sales. True Religion was taken private when it was bought by investment management firm TowerBrook Capital Partners in 2013.

    Ultra Petroleum

    On April 30, the energy company, Ultra Petroleum filed for bankruptcy for the second time and agreed to a balance-sheet restructuring with its creditors. Ultra Petroleum previously entered Chapter 11 proceedings in 2016. Ultra Petroleum has approximately debt of $2 billion as of Dec. 31 and business disruption from the coronavirus has caused the bankruptcy.

    Ultra Petroleum secured financing of up to $25 million through the restructuring agreement and a revolving credit facility with an initial borrowing base of $100 million from lenders. The company said it will be able to eliminate $2 billion in debt. Ultra Petroleum’s operations are primarily focused on natural gas reserves in Wyoming. The company had $742 million in revenue for 2019.

    Whiting Petroleum

    On April 1, the oil and gas company, Whiting Petroleum filed for bankruptcy because of the Saudi-Russia price war and the drop in oil demand driven by the Covid-19 pandemic. Both of these factors contributed to its decision to file for bankruptcy according to Whiting Petroleum.

    The officials said the company plans to convert more than $2.3 billion in senior notes into new equity which would account for 97% of the reorganized company’s ownership. Whiting will also provide payment in full of its revolving credit facility and expects to be out of Chapter 11 proceedings within five months.

    The company said it has $585 million of cash on its balance sheet and will continue normal business operations. Whiting’s business is situated in the Rocky Mountain region of the U.S. It has its largest projects in North Dakota and Colorado. Whiting’s market valuation fell from its peak $15 billion to $32 million in 2011.

    Chesapeake Energy

    The oil and gas company is reportedly preparing a bankruptcy filing after its business took a hit from the Saudi-Russia price war and declining demand for oil amid the coronavirus pandemic. The Oklahoma City-based company was once at the forefront of the U.S. shale boom.

    The company was burdened with $9 billion in debt even before the pandemic and price war. Chesapeake is in talks to secure $1 billion in debtor-in-possession financing that would help it fund operations and is considering skipping a $192 million payment due in August. It also faces a July 1 payment of $136 million.

    Founded in 1989, Chesapeake has operations in five U.S. states, including Pennsylvania, Texas and Louisiana. It employed about 2,300 people as of the end of 2019.

    Hertz

    The car rental company Hertz doubts its ability to continue as a going concern which indicates that it is on verge of bankruptcy. The company’s executives have been trying to postpone the roughly $500 million payment. Yet, it has secured debt restructuring advisers and is preparing for negotiations with creditors over its $17 billion in debt.

    The car rental industry has been affected severely due to coronavirus pandemic. Hertz had laid off 10,000 people amid the crisis, incurring employee termination costs of $30 million. The Estero, Florida-based company is now working with restructuring experts at law firm White & Case and investment bank Moelis & Co. in order to address its debt issues.

    JC Penney

    On May 15, J. C. Penney Company Inc., with its Chapter 11 filing, became the largest retailer in the United States to file for bankruptcy amid the coronavirus pandemic. The Plano, Texas-based company is facing numerous challenges like declining sales and nearly $4 billion in debt. Most of J.C. Penney’s stores have been closed since March 18 because of the coronavirus.

    JC Penney had skipped a $12 million interest payment due on April 15 and a $17 million due on May 7. Upon missing the first payment, the company entered a 30-day grace period “in order to evaluate certain strategic alternatives. J.C. Penney plans  to secure about $450 million to fund its operations in bankruptcy.

    The company operates about 850 stores in the U.S. and employs nearly 90,000 workers. However, the retailer may have to permanently close 200 of these stores as part of its bankruptcy process. Penney saw total net sales for the fourth quarter ended Feb. 1 fall 7.7% to $3.38 billion from last year.

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    Lord & Taylor

    American luxury department store Lord & Taylor is also preparing for bankruptcy and plans to liquidate inventory in its 38 department stores once restrictions to curb the spread of Covid-19 are lifted according to reports. The retailer braces for a bankruptcy process and does not expect to survive the bankruptcy process.

    Lord & Taylor, billed as the oldest in the United States, was founded in 1826 and once a major retailer in the U.S. But then it struggled to compete with other rivals such as Macy’s and TJX Companies which operates TJ Maxx and Marshalls. Department stores in general have faced challenges from online retailers and consumers purchasing less apparel.

    Le Tote, owner of Lord & Taylor, owes $23.53 million to Hudson’s Bay Company after buying the retailer from the Canadian department store chain for CA$100 million in 2019. Hudson’s Bay maintained possession of some of Lord & Taylor’s real estate and took on responsibility for its rent payments. The company could use a bankruptcy filing to take some of its leases back from Lord & Taylor.