Errors for business management are among the most common causes of why a company becomes insolvent. After all, every fifth bankruptcy arises in the beginning: due to errors in establishing the company.
Almost two -thirds of all the company’s bankruptcies are due to operational or strategic causes and personal errors in 2024, according to an analysis of the KSV1870 Creditor Protection Association.
“The required profile for top management is undoubtedly high in times of several crises and many could not agree,” says Karl-Heinz Götze, head of bankruptcy at the Credit Protection Association of 1870.
42.3 percent of the 4,000 investigated bankruptcy had operational causes. This included problems with financing or errors in personnel selection. In comparison with the year before, these causes of banking increased according to KSV1870 – in 2023, 37.1 percent of the bankruptcies were due to these reasons.
Strategic reasons also become the cause of the bankruptcy. In 2024, 11.5 percent of bankruptcies entered into as a result of strategy problems such as a slow response to market changes or disputes between shareholders. Personal error was given as a reason for a tenth of the bankruptcies.
Each fifth bankruptcy due to errors in the foundation
Foundation errors were the trigger of bankruptcy for each fifth bankruptcy in the previous year. “To be successful as an entrepreneur, it not only needs corresponding specialized knowledge with regard to the start -up and leadership, but also detailed expertise about the respective industry,” Götze said. Both are “not always enough in practice.”
Unavailable conditions – including natural disasters, pandemies, illness or war – were only the cause of the insolvency in 11.2 percent of the cases in the previous year, after 19 percent in 2023. External causes such as changes in interest rate or legal changes caused 5.0 percent of bankruptcies.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
