Small Business Risk Factors in Today's Market

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Gives information on small businesses and discusses several risk factors.

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Small Business Risk Factors in Today's Market

  1. 1. Small Business Risk Factors in Today’s Market
  2. 2. Author/Lecturer <ul><li>DAVID L. OSBURN </li></ul><ul><li>David is the founder and managing member of David L. Osburn & Associates LLC, a Las Vegas-based business training and contract CFO firm that provides seminar/keynote speeches for various groups including CPAs, bankers, attorneys, credit union employees, credit managers, trade groups, and businessowners. He also serves as a contract CFO for a large multi-state construction company, co-manages a bank educational program with the University of Nevada Las Vegas, and is a board member of North Star Business Services, a commercial lending company (commercial real estate and equipment financing). </li></ul><ul><li>His extensive professional background encompasses over 25 years in banking, finance, and marketing. His bank commercial lending credentials include comprehensive loan underwriting, management, customer development, and loan workout experience. </li></ul><ul><li>In addition, David is an Adjunct Professor for Regis University, an accredited MBA program and the College of Southern Nevada, a community college. He has taught college courses for over 24 years, covering Finance, Accounting, Economics, Marketing, Banking, Business Law, and Management. </li></ul><ul><li>He earned an MBA in Finance/Marketing from Utah State University and a BS in Finance from Brigham Young University. He is also a graduate of the University of Oklahoma National Commercial Lending School. </li></ul><ul><li>David L. Osburn & Associates, LLC </li></ul><ul><li>A Business Training & Contract CFO Firm </li></ul><ul><li>David L. Osburn, MBA </li></ul><ul><li>Managing Member </li></ul><ul><li>7521 Enchanted Hills Ct. </li></ul><ul><li>Las Vegas, Nevada 89129 </li></ul><ul><li>Direct: (702) 655-1187 </li></ul><ul><li>Fax: (702) 382-2298 </li></ul><ul><li>E-Mail: [email_address] </li></ul><ul><li>Web: dlosburn.com </li></ul>
  3. 3. <ul><li>CREDIT ISSUES IN SMALL BUSINESS </li></ul><ul><li>Target Marketing to Small Businesses: Tuesday, 9/15/09, 9am </li></ul>
  4. 4. <ul><li>Small Business Risk Factors in Today’s Market </li></ul><ul><li>I. What is a Small Business? </li></ul><ul><li> Annual revenue: Less than $5MM; less than $50MM </li></ul><ul><li> Employee: Less than 10 FTE; less than 100 FTE </li></ul><ul><li> II. Introduction to Small Business Risk Factors </li></ul><ul><li> Past Level of Risk? Current Level of Risk? Future Level of </li></ul><ul><li>Risk? </li></ul><ul><li> </li></ul><ul><li> </li></ul>
  5. 5. <ul><ul><ul><li>III. Macroeconomic Risk Factors: </li></ul></ul></ul><ul><ul><ul><li>a) Credit Risk : </li></ul></ul></ul><ul><ul><ul><li> 1. Arises from an obligor’s failure to meet the </li></ul></ul></ul><ul><ul><ul><li>terms of any contract with the financial institution (or </li></ul></ul></ul><ul><ul><ul><li>lender) or otherwise does not perform as agreed. </li></ul></ul></ul><ul><ul><ul><li>2. Includes all activities where success depends on the </li></ul></ul></ul><ul><ul><ul><li>performance of a person or organization independent of </li></ul></ul></ul><ul><ul><ul><li>the lender. </li></ul></ul></ul><ul><ul><ul><li>3. The contractual agreement may be actual or implied, </li></ul></ul></ul><ul><ul><ul><li>reflected on or off the balance sheet. </li></ul></ul></ul>
  6. 6. <ul><li> b) Interest Rate Risk : </li></ul><ul><li>1. Arises from movements in interest rates, which </li></ul><ul><li>adversely affects market value. </li></ul><ul><li> 2. Further classified into: Basis Risk, Option Risk, </li></ul><ul><li>Repricing Risk, and Yield Curve Risk. </li></ul><ul><li> c) Industry Demand : </li></ul><ul><li> 1. Law of Supply & Demand </li></ul><ul><li> 2. Price Elasticity of Demand </li></ul>
  7. 7. <ul><ul><ul><li>IV. Microeconomic Risk Factors: “Specific” Product </li></ul></ul></ul><ul><ul><ul><li>Demand/Supply </li></ul></ul></ul><ul><ul><ul><li> Transaction Risk : </li></ul></ul></ul><ul><ul><ul><li> 1. Risk arises on a daily basis from problems with service or </li></ul></ul></ul><ul><ul><ul><li>product delivery. This risk is a function of internal </li></ul></ul></ul><ul><ul><ul><li>controls, information systems, employee integrity, and </li></ul></ul></ul><ul><ul><ul><li>operating processes. </li></ul></ul></ul><ul><ul><ul><li>2. Can be further classified into: </li></ul></ul></ul><ul><ul><ul><li>Fraud Risk, Internal Operations/Systems Risk, and Plant </li></ul></ul></ul><ul><ul><ul><li>Operations Risk </li></ul></ul></ul>
  8. 8. <ul><li>V. Small Business Risk Factor Protection in a Down Market </li></ul><ul><li> a) Liquidity Risk : Inability to manage unplanned changes in </li></ul><ul><li>funding sources. </li></ul><ul><li>b) Price Risk : Arises from changes in the value of assets. </li></ul><ul><li>c) Compliance Risk : Violations or non-compliance with laws, </li></ul><ul><li>rules, regulations, prescribed practices, or ethical </li></ul><ul><li>standards. </li></ul><ul><li>d) Reputation Risk : Arises from negative public opinion. </li></ul><ul><li>e) Strategic Risk : Is a function of the unity and integration of </li></ul><ul><li>the organization’s strategic goals, the strategies developed </li></ul><ul><li>and resources used to achieve these goals, and the quality </li></ul><ul><li>of implementation. </li></ul><ul><li> </li></ul>
  9. 9. <ul><li> VI. Credit Provider’s Risk Factor Protection in a Down Market </li></ul><ul><li> a) Assessment of the Small Business Risk Factors </li></ul><ul><li>b) Assessment of the Small Business Owner/Guarantor </li></ul><ul><li> c) Assessment of the Credit Provider’s “Own” Risk Factors </li></ul><ul><li> d) Assessment of the Credit Provider’s “Own” Management </li></ul><ul><li>& Staff </li></ul><ul><li> </li></ul><ul><li>What can you do to “mitigate” the above risk factors? </li></ul>

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