Navigating Insolvencies in 2024

About this virtual conference

On March 20, 2024, we hosted a virtual conference focused on navigating insolvencies in the coming year, presented to the Business Development Bank of Canada (BDC). In this insightful session, I had the privilege of interviewing Mr. Maxime Lemerle, the Lead Analyst for Insolvency Research at Allianz-Trade, as we explored the resilience of Canadian entrepreneurs in the aftermath of COVID-19.

As entrepreneurs worldwide grapple with the ongoing repercussions of the pandemic, understanding the key challenges that lie ahead is crucial. I asked Maxime Lemerle to identify the primary international obstacles that may threaten entrepreneurial financial stability in 2024 and explore potential navigation strategies.

Maxime’s Insights on the Main Challenges

Maxime outlined five significant challenges poised to make 2024 a pivotal year for firms globally:

Profitability Squeeze: 

Businesses are facing a profitability crunch as below-trend GDP growth in major economies like the US, the Eurozone, and China intensifies. Simultaneously, high operating costs persist, with little respite expected from energy prices, wage growth, and ongoing supply chain disruptions, affecting key routes like the Red Sea and Panama Canal.

Rising Uncertainty: 

Geopolitical fluctuations and increasing risks of non-payment are adding layers of complexity to business operations. This makes accurate forecasting and planning increasingly challenging, especially with volatile input costs and foreign exchange rates complicating supply chain management and budgeting.

Financing and Liquidity Pressures: 

With financing and liquidity conditions remaining stringent, concerns mount over businesses’ ability to handle borrowing costs and maintain profitability. The most vulnerable sectors and firms, particularly in countries like the UK, France, Italy, and Germany, face heightened risk due to restricted financing options.

Resilience Testing for New Entrepreneurs: 

In Europe, entrepreneurs who started their ventures during the pandemic will undergo their first significant test of resilience. The registration of new businesses in this region saw a 14% increase in 2021-2023 compared to 2016-2019, indicating a burgeoning entrepreneurial spirit that will now be put to the test.

Sector-Specific Risks: 

Certain sectors are at a higher risk of affecting jobs and the economy, including hospitality, transportation, and wholesale/retail. The construction and real estate sectors are anticipated to significantly contribute to the rise in insolvencies. If the current trend continues, it could result in a substantial number of firms facing insolvency in key European countries.

Conclusion

The outlook for 2024 presents a complex array of challenges for entrepreneurs globally, with financial stability hanging in the balance. Maxime’s analysis serves as a critical beacon for businesses to prepare and adapt. As we head into a year of significant economic recalibration, entrepreneurial ingenuity, rigorous planning, and strategic flexibility will be key to navigating the turbulent waters of the global economy. It’s not just about weathering the storm but also seizing the opportunities that arise from adversity.

About this series

This insightful session is part of our ongoing commitment to providing valuable perspectives that can help entrepreneurs and business leaders strategize for the future. For those who missed the earlier sessions, we invite you to review the conference materials available on our website for a comprehensive understanding of this evolving landscape.

For further details

For those looking for further details or who have additional questions, Jocelyn St-Onge from Allianz-Trade Canada and I, Roch Simard, are readily available as resources to assist you.

We extend our gratitude to Maxime Lemerle for his expert analysis, to Véronik Ménard and her team at the BDC for facilitating this important discussion, and to all the participants who joined us for this conference. It’s through these collaborative efforts that we can equip ourselves with the knowledge and tools needed to thrive in the evolving business landscape of 2024 and beyond.