In times of financial difficulty, it’s important to know that those in positions of importance are capable of doing what is in the best interests of the company. This can mean making some tough decisions, choosing to liquidate or appoint a voluntary administrator, for example, or put a strategy in place to get through a challenging period.
It’s somewhat concerning then that so many business leaders across the globe don’t feel equipped to navigate through a crisis successfully. Deloitte’s Crisis in Confidence survey found that only 49 per cent of respondents felt their capabilities were adequate to ensure the best possible outcome when they come out the other side.
Speaking specifically about Australian businesses, Deloitte Managing Partner, Risk Advisory, Harvey Christophers noted that, even for those organisations that do manage to return to stability, the recovery process can be a long one.
“In Australia almost 60 per cent of big businesses surveyed said it took them between one and three years to recover their business’ reputation as well as their operations,” he said.
“Half of the board members said it took the same time for financial recovery. And for 10 per cent of the businesses, it took more than four years to recover.”
The perils of failing to prepare
Additional findings in the Deloitte survey show that lack of preparedness amongst businesses could be the root of the problem. Just 32 per cent of respondents said their organisations engaged in simulation exercises to train them in crisis management, while less than half had developed playbooks for likely scenarios.
Taking the time to formulate a crisis preparedness strategy, with the help of trusted financial advisors, can have a huge impact on how your organisation comes out the other side of your difficulties. There is also little excuse for failing to consider some hypothetical scenarios. A survey from Freshfields Bruckhaus Deringer found that, in almost 60 per cent of cases, companies had anywhere from a few days to several months of warning in which to plan their response.
It is obviously still possible for a difficult financial situation to appear suddenly and unexpectedly, however those organisations that have tested their responsiveness in one scenario may find themselves more able to adapt and cope.
Planning for a crisis
As a company director, your first challenge is being able to identify the signals that financial difficulties are approaching. The Australian Securities and Investments Commission has an extensive list of warning signs, with some of the most common problems coming from:
- Failure to develop a business plan
- Allowing taxes and superannuation liabilities to be overdue
- Lack of complete financial records or disorganised internal accounting procedures
- Neglecting cash-flow forecasts and budgets
Clearly, each of these issues can be prevented simply by implementing more effective strategic planning into your business. It’s difficult to completely shield yourself from external factors which could put your company in trouble, but making sure your accounting practices are well taken care of can help you to address problems before they can develop.
Your business’ response to a crisis will obviously be dependent on the severity of your situation, but if you would consider your company to be amongst those unprepared for a crisis, the time to act is now. Reaching out for help from expert financial advisors is a great way to get an impartial perspective on your company’s position.
From an initial solvency analysis right up to liquidation and voluntary administration services, Corporate Lifeline can help guide you through the challenges of the modern business environment. Speak to us today for advice on how to best address your unique difficulties.