Report: Business Risk Increased in 2012

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The combined business risk index for 2012, which was issued yesterday by the business data firm BDI Coface, shows an overall 6% increase in business risk here. The sector with the riskiest business environment was the restaurant and cafe industry. The industry where the risk was deemed least risky was the chemicals industry.

BDI Coface pegged the overall risk at slightly above average internationally. A rating of 6 is considered average and the general rating for the economy came in at 6.32, the company said. In 2011, the overall figure was 5.95. Among the negative phenomena noted in 2012 was longer delays in the payment of bills in two-thirds of the business sectors rated.

“About 12% of companies and businesses suffer from severe cash-flow problems, restrictions on bank accounts imposed by the Bank of Israel, problems with bounced checks, a sharp drop in revenues or profitability, or sharp shifts from profit to loss in a way that threatens their continued operation over the next year or two,” said BDI Coface co-CEO Eyal Yanai. “The worsening situation is expected to continue into 2013 as well. Businesses are suffering from a credit crunch, international markets are stalling, and the business sector is pessimistic and is feeding the negative expectations.”

At the top of the list of risky businesses, the rating of the restaurant and cafe sector stood last year at 7.24, a score showing an 8% worse risk score compared to 2011. In declining order of risk after restaurants was the tourism and hotel sector at 6.89, 6% worse than the year before. In third place were land-based moving companies at 6.70, reflecting a risk score that was more than 5% worse than 2011. Fourth, at 6.62, was the wood and furniture industry, a rating that was 10% worse last year than the year before.

Although the chemical industry was rated as the least risky, at 4.72, that was still 2.7% worse than the score the sector obtained in 2011. The next-best score was the cosmetics, pharmaceutical and detergent sector, with a 4.99 rating. The paper and carton business scored third best at 5.20 followed by metals at 5.39.

Payment practices in the business sector as a whole reflected the worsening conditions. The average delay in paying bills rose from nine days in 2011 to 11 last year. The average credit provided by consent from suppliers to their customers rose by one day to 93 days on average last year while the actual number of days in practice, whether by agreement or not, rose from 101 to 104 days. The problem was at its worst in the hotel, hospitality and restaurant sector.

Some businesses involve more risk than others. Credit: Bloomberg

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