Financial Distress Essay Example | Topics and Well Written Essays - 500 words

Financial Distress - Essay Example The inevitable natures of factors which interplay and caused this financial turmoil on a global scale make business decisions difficult especially in areas of retrenchment. For a university which had been in operation for 164 years since its foundation in 1845, Cornell University is not exempt from the global financial crunch. As such, strategies and efforts are being evaluated to assess the possibility of retrenchment to ensure the very survival of the organization. It is in this regard that this essay is written to explain the circumstances of the financial distress and to outline an action plan where the principles of retrenchment would be implemented in order to restore equilibrium. In the year end statement written by the president of Cornell University, David J. Skorton on July 1, 2009, he identified the following effects of the global financial crisis in Cornell University, to wit: (1) a looming budget shortfall in one of its major colleges, Ithaca; (2) a 27% reduction in endowment (â€Å"reducing base budgets across the university; drawing down uncommitted fund balances; reducing endowment spending by 15 percent; implementing a construction pause, during which we reconsidered a number of proposed new projects, and decided not to pursue over $662 million in incremental capital expenditures; implementing an external hiring pause, which preserved opportunities for current Cornell employees who lost their jobs; and responsibly reducing our workforce†) and (3) a reduction in the cost of university administration in order to focus precious resources on core activities of teaching, learning, discovery, scholarship and outreach, among others. (Cornell Univer sity, University Statements, 2009) The university applies the following principles of retrenchment: (1) Selective Retrenchment Efforts where the university will use curtailment or reduction of selective activities, functions or