The Context
This isn’t a few companies failing. It’s a systemic rupture. In the first half of 2025, 17 mega-bankruptcies (companies with over $1bn in assets) were filed—the highest half-year count since the 2020 pandemic shock. Through November 2025, 717 large corporate bankruptcies were recorded, already exceeding the total for the entire year of 2010. The surge is broad-based: small business restructurings jumped 30% year-over-year in July, and the industrials sector alone saw 110 filings. The cause is a perfect storm of elevated interest rates, persistent inflation, and disruptive policy shifts, particularly in energy and trade.
The Risk
For a New Zealand director, this isn’t a foreign news story. It’s a direct threat to your duty of care. Your company’s critical supplier, a key customer, or a joint venture partner could be one of those 717. A sudden failure in your supply chain can halt production, breach customer contracts, and crater revenue overnight. This creates potential exposure under Section 131 of the Companies Act 1993, which requires directors to exercise the care, diligence, and skill of a reasonable director. If you have not actively assessed and mitigated this known, systemic counterparty risk, a court may find a failure of that duty. The liability isn’t just corporate; it’s personal. Your reputation for strategic foresight is also on the line when a preventable, cascading failure hits the bottom line.
The Control
Move from passive monitoring to active stress-testing. Demand a live, tiered map of your top 20 critical suppliers and customers, categorised by their financial health, sector exposure, and geographic concentration. This isn’t a static annual report; it requires continuous monitoring of payment trends, credit ratings, and sector news. Instruct management to model scenarios: what happens if our top two suppliers in the distressed industrials sector fail simultaneously? Develop and fund contingency plans, including identified alternative suppliers and buffer stock strategies. Treat financial contagion with the same rigour as a cyber attack or natural disaster.
The Challenge
These are the critical questions you should be raising at the board table:
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Which of our top five revenue-generating customers or most critical sole-source suppliers are in the industrials or consumer discretionary sectors, and what is our real-time assessment of their solvency risk? |
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When was our business continuity plan last stress-tested against the simultaneous failure of two major counterparties, and what was the quantified financial impact? |
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What specific, leading indicators (beyond late payments) is management monitoring to provide the board with an early warning of counterparty distress, and how often is this dashboard reviewed? |