Circumstances requiring a turnaround management process
The drivers of the requirement for a dedicated turnaround management process include:
- Deteriorating financial performance and cash position.
- Necessity for operational and management change to “fix” the company.
- Limited management ‘bandwith’ to deal with the relevant issues.
- Stakeholders losing trust in or no longer supporting the business.
To make a turnaround process worthwhile there must be a reasonable prospect of financial upside being created for the stakeholders involved.
Positively, a survey conducted by the Turnaround Management Association showed around 50% of companies originally classified as salvageable are saved.
Before going into a turnaround management process an assessment must also be made of:
- Costs – a turnaround management process typically involves expenses from advisers and financiers/investors for debt and equity restructuring. It must be ensured that these costs do not outweigh the financial upside created by the turnaround.
- Risks – the risks of a turnaround can be such as to make the prospects of a successful outcome occurring too remote and therefore the process is not worthwhile.
- Crisis stabilisation.
- Internal and external stakeholder management.
- Structural and management changes.
- Operational improvements.
- Strategic changes.
- Financial restructuring.
- Change management.
- Independent financial and strategic review.
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