engleski

Early warning system- theroetical and empirical analysis

With the growth of uncertainty, the gap between needed and available time for business decision making is increasing. Indicators and early warning systems are becoming more important as they can foresee possible future changes in their early stages and through it reduce the time needed to make adequate decisions. They enable management to avoid possible crisis and seize potential chances. The role of early warning systems as an instrument for crisis aversion is in: revealing weak signals, transferring important information about environmental changes, prevention of business crisis, and constructing a creative base for timely and appropriate response. Key intention of this paper is to explore the role and importance of early warning systems and to evaluate its existing level and limitations of its use. Also, research explores and analyzes which types of early warning indicators are most often used, as well as identifies the users of such systems in Croatian firms. We assumed that early warning systems in domestic business practice are operative and short term oriented, whereas strategic and long term early warning systems are largely neglected. Furthermore, we assumed that successful firms more often use early warning indicators as opposed to less successful ones, i.e. early warning indicators constitute a critical business success factor. Empirical research was conducted on a sample of 900 firms in Croatia, members of Croatian Employees Association. Research lasted from November 2009, to April 2010. In that period, with a few iterations, we have received 79 fully completed survey questionnaires (8, 78% rate of return). Research survey questionnaire was sent via e- mail, containing 43 closed type questions. Gathered results were analyzed by SPSS statistical software. In this paper we are presenting a part of our research pertaining to early warning system. Results indicate partial use of indicators and early warning systems in Croatian firms. More frequent use was distinguished in operative early warning indicators than in the strategic: divergence of attained from projected profit margin and monitoring of firm liquidity level are the most used operative early warning indicators, while competitor and branch analysis are the most often used strategic early warning instrument. Board members, CEO’s, and divisional directors are the main users of early warning systems, while the lack of experts for gathering and analysis of indicators, as well as the absence of management initiatives are the crucial reasons for deficiency in early warning systems implementation. Focus on operative indicators was also confirmed by the latest research conducted among managers from top 50 firms, from 13 different industries, according to whom cost optimization is the most important measure of restructuring. Strategy development and business model adjustments are less important, while risk management is neglected. Based on all of the specific individual results, we can summarize that firms are oriented towards operative business tasks. Since a strategic early warning system exemplifies superior results in business crisis prevention and in Croatian practice is not sufficiently represented, implying that domestic firms are not adequately prepared for possible future challenges. Global economic crisis should be an encouragement for more intensive implementation and use of not merely operative, but strategic early warning systems as well.

early warning system ; business crisis ; crisis prevention ; Croatian firms

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