In these turbulent economic times, frantic calls from clients doing business with counterparties facing financial distress or bankruptcy is an increasingly common occurrence. As businesses continue to endure decreased sales, a tight-fisted credit market and an uncertain outlook, their suppliers, shippers and service providers may have reasonable cause for insecurity. Clients may face exposure to increased credit risk and even missed payments from their counterparties, and the future of their business and their business relationships may be in doubt.
Against this backdrop, clients seek guidance to position themselves to respond to the warning signs of a counterparty’s financial distress in order to minimize exposure to harm before a breach or bankruptcy. This article discusses various strategies for consideration when doing business with financially distressed counterparties to maximize recovery and mitigate losses. While it is not the “end all, be all,” this article provides helpful guidance to protect against risk ever present in the marketplace.
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