Business Risk in Times of Economic Recession and Economic Growth

Abstract

The issue of business risk in times of recession or growth is very topical in these times. The Czech Republic and its neighboring countries are currently struggling with the economic problems caused by the Covid-19 pandemic. The aim of the paper is to analyze the number of insolvency petitions in the Czech Republic from the years 2010–2020 and to compare them with each other. The data source are data from publicly available resources from the Creditreform group and also from the CRIF database of the Cribis platform. First were created tables for the Agriculture and Forestry, Manufacturing, Construction and Transport sectors. Data for the relevant years were added to them from the aforementioned resources. Then was created a line chart for each industry. Using time series analysis and comparison, we analyze and compare the development of insolvencies. At the same time, we use causal analysis to find out why there were high numbers of insolvencies in the given years. We are also looking at which sectors were hit hardest during the insolvency crisis, when they were hit hardest, how they did in times of economic growth and how they should adapt to the next possible crisis. During the Great Recession, the construction sector was hit the hardest, and then the transport sector also suffered greatly. The largest numbers of insolvencies can be observed in 2012. At a time of economic growth, which began in 2014, the numbers of insolvencies fell in all sectors analyzed, but mostly in agriculture and forestry and transport. Businesses in the sectors analyzed can adapt to the next crisis by creating larger cash reserves or changing, for example, crop production or transport by temporarily reducing fares to attract new customers. We see the benefit of this work in the analysis of the number of insolvencies in the given sectors, which has not been recorded in almost any academic papers. We also see a benefit in determining the conditions for how companies can prevent another crisis.