Setanta on the brink!

In Article 14 in the book I introduce you to the concept of business risk showing how it was impacting on Blacks Leisure in May 2007. To remind you it is:

The general risk that can impact on a company’s cash flow or profitability. It could be caused by general economic conditions (consumer spending, level of interest rates etc) as well as more specific company factors (changes in key staff, strike action by employees etc).

In contrast financial risk refers to the possibility that a company might not be able to meet its debt obligations (interest and principal payments).

In the case of the Setanta they have been hit by both forms of risk. On the one hand the impact of the recession combined with their failure to secure enough Premiership soccer games for the 2010-13 seasons means that they are not able to reach the required number of subscribers for their sports TV package. Sure they have the IPL cricket, some US tour golf and some Rugby but it the top level football than brings in their customers. When they revert to just 23 games per season many of their customers will leave. This is a perfect example of business risk in practice.

And the financial risk stems from their huge debts that they can no longer afford to pay. As a result the business is in emergency talks trying to find some way out of the inevitable slide in administration. It is already closed for new customers and the existing ones could well find blank screens soon.