These Are the Most Common Causes of Insolvency in Austria

Errors in business management, such as strategic mistakes, financing deficiencies, liquidity bottlenecks, or sales problems, are common reasons for insolvencies. According to an analysis by KSV1870, in 2024, about two-thirds of company bankruptcies are attributed to operational or strategic causes and personal fault.

Management Errors Most Common Cause of Insolvency in Austria

"The requirements for top management are undoubtedly high in times of multiple crises, and many could not meet them," said Karl-Heinz Götze, Head of Insolvencies at the Creditor Protection Association of 1870. According to this, 42.3 percent of the 4,000 insolvencies examined from the previous year had operational causes. These included, among other things, problems with financing or liquidity, errors in controlling or personnel selection, as well as weaknesses in sales or cost structure.

Compared to the previous year, these causes of insolvency have increased according to KSV1870 - in 2023, 37.1 percent of bankruptcies were attributed to these reasons. Strategic reasons are also more frequently becoming causes of insolvency. In 2024, 11.5 percent of insolvencies occurred due to strategy problems such as excessive expansion, too slow a reaction to market changes, or disputes between shareholders. In 2023, it was 9.6 percent. Personal fault was cited as the reason in 10 percent of bankruptcies, after 11.1 percent the year before.

Every Fifth Insolvency in Austria Due to Founding Errors

Founding errors were the trigger for bankruptcy in every fifth insolvency in the previous year. "To be successful as an entrepreneur, it requires not only appropriate expertise regarding company founding and management but also detailed expertise about the respective industry. Both are often not sufficiently available in practice, alongside the monetary base," said Götze. Uncontrollable circumstances - including natural disasters, pandemics, illness, or wars - were the cause of insolvency in only 11.2 percent of cases in the previous year, after 19 percent in 2023. External causes such as changes in interest rates or legal changes caused 5.0 percent of insolvencies (2023: 2.7 percent).

(APA/Red)

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