Arthur D. LittleArthur D. Little

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Sales Excellence

Dealer Risk Assessment and Contingency Plan Development

Challenge

Due to the recent financial crisis and economic downturn, many dealers within the major Asian market of our client have encountered financial risk or have gone into bankruptcy. Our client therefore wanted to understand the financial situation of its dealer network in this market, and assess the impact to its business. Using a systematic approach the key challenge of the project was to assess approximately 1000 dealers covering 5 dealer networks within a very short period of time.

Approach

By conducting interviews with dealers and financial institutions the key risks and their impact on the dealers were identified. Based on financial data and performance ratios of each dealer, we conducted both static and dynamic analysis to understand the current risk level and project liquidity gaps of the dealers in the next 12 months based on different scenarios. We consolidated the results in an overall risk portfolio and showed the impact on our clients business in the relevant market.

Value

For each dealer our client had in-depth insights of the assessed financial risk level (static model) and project liquidity gaps (dynamic model). On brand level we provided a risk portfolio analysis and the estimated impact on dealer risk e.g. sales at risk and revenue at risk. We identified the funding needs for the client to support/rescue the high-risk dealers and developed initial ideas for risk mitigation measures.

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