CONSEQUENCES OF SICKNESS
(I) Misutilization of institutional funds
The sickness in any sector on account of this factor results ultimately in stagnation of capital investment. Misutilisation of scarce resources by the sick units cannot be tolerated
(ii) Creation of unemployment problem in the economy
Workers lose jobs on account of closure of sick units with the result that the economy bears additional problem of unemployment of labour force as the economy has already an abundance of labour force.
(iii) Reduction of foreign exchange earnings
There will be a reduction in the earnings of foreign exchange if any big unit falling sick is fetching less foreign exchange on account of sale of its finished products abroad.
(iv) Effect on financial institutions and government
Industrial sickness to the financial institutions is the big question of sinking large funds and the precious scarce capital going waste and valuable assets remaining idle.
FACTORS AFFECTING THE SME UNITS Business Risk
The factors which are responsible for the industrial sickness can be of two groups: External factors and internal factors. External factors are those which affect all the units in an industry and which are beyond the control of the management of a unit. These factors determine the business risk of the firm.
External factors include a) scarcity of raw-material b) inadequate credit facilities c) infrastructural constraints d) lack of modern plant & equipment e) inflationary tendencies and f) government regulations. Whereas internal
factors i nclude a) non- professional management b) faulty project planning in the initial stages c) poor manpower planning d) inadequate knowledge of market diversification and e) absence of research and development.