Operational and financial restructuring
Companies are increasingly focused on making sure that their operational model is leaner and more adaptable to change. This includes carrying out a fundamental review of all business areas including route to market, supply chain management, management information systems and back office. All existing practices, processes, agreements and relationships should be challenged. No area should be immune from review. Strong leadership and staff ‘buy in’ are critical.
As banks deleverage, funding remains scarce. Understanding the funding needs of your business and managing the expectations of capital providers and other creditors should be on the agenda for all businesses in 2012. Investment should be made in assessing your capital requirements in the short, medium and long term. It’s important to ensure that plans are in place to address any issues identified. Ongoing business planning and constant communication with lenders and investors is particularly important.
Troubled financial situations
Many businesses are continuing to experience very difficult trading conditions which, combined with a lack of funding, is leaving them in a challenging position with no recovery plan in place. In many cases businesses will be able to trade out of difficulty but in other circumstances more direct action is required. Triggers to watch out for include loss of key customers, significant bad debts, ongoing trading or cash flow losses, covenant breaches, upcoming expiry of bank facilities.
With businesses being predominantly focused on operational restructuring to date, we see it becoming more and more important that businesses understand the full spectrum of funding options available to them to create a stable capital structure. In some instances this may involve formal restructuring such as examinership or receivership. In other cases informal settlement arrangements are possible. Whatever the outcome upfront planning and preparation are crucial to maximising the outcome for all stakeholders.
