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130,000 businesses downgraded, suffer financial stress in crisis

Nearly 130,000 Australian businesses have had their risk profile downgraded since October 2008, with many now at a higher risks of experiencing financial distress over the next 12 months as the economy deteriorates further, according to Dun & Bradstreet.

The figure is the largest number of downgrades Dun & Bradstreet have had to perform ever in a six month period. The rating shows that cash flow pressures are becoming increasingly prevalent among businesses.

Dun & Bradstreet CEO Christine Christian believes that the large number of risk and payment business downgrades show that the economy is deteriorating further and businesses are unprepared.

“The scale of downgrades are significant and demonstrate how quickly the deteriorating economy has impacted Australian businesses.

“However, the deteriorating economy alone is not to blame. Downgrades on this scale are a clear sign that many businesses simply weren’t paying close enough attention to risk management and cash flow and these businesses have been caught out by the speed with which the economy has deteriorated.”

Those industries worst hit were agriculture, forestry, fishing, mining and construction. On a state breakdown, New South Wales, Queensland and Northern Territory suffered the largest number of downgrades with more than 10 percent of firms in each state suffering downgrades.

Christian believes now more than ever, is the time for businesses to act and “gain a clear understanding of their exposure to both failure and late payments” and “manage their customers and suppliers accordingly.”

She believes if they fail to do this, they will “become a casualty of the current environment.”

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