Business Recovery Services – Turnaround Management
The present business scenario is one wherein constant change is the name of the game. For any firm to survive in any industry there has to be constant monitoring and improvement of its systems and operations.
A tough economic climate, rapid market changes, new competitors, disruptive technologies, strategic errors —any or all of these— can plunge a company into serious financial distress. Left unaddressed, they may threaten corporate survival. Whether these factors occur in isolation or converge, they typically trigger a host of problems, including underperformance, declining earnings, and liquidity and cash-flow blockages. Companies often exhibit symptoms of distress well before a crisis erupts. In many cases, a downward spiral is not inevitable. It can be arrested and reversed. Early detection and swift, decisive action are the keys to restoring performance and value. That’s why timely, professional advice is critical.
The process of bringing about a revival in a firm’s fortunes is what is termed as “Turnaround Management”.
There are 3 phases in the Turnaround Management:
- The diagnosis of the impending trouble or the danger signals
- Choosing appropriate Turnaround Strategy
- Implementation of the change process and its monitoring.
Phase I: Watching out for the danger signal
Do companies turn sick overnight and qualify as potential candidates for turnaround, or do they become sick slowly, which can be stopped by timely corrective action? Obviously only the latter is possible. But in reality, most companies do not recognize this fact. The following are some of the universally accepted danger signals, which a company should watch out for:
- Decreasing market share / Decreasing constant rupee sales
- Decreasing profitability
- Increased dependence on debt / Restricted dividend polices
- Failure to plough back the profits into business / Wrong diversification at the expense of the core business.
- Lack of planning
- Inflexible CEO / Management succession problems / Unquestioning Board of Directors
- A management team unwilling to learn from competitors.
Phase II: Choosing appropriate Strategy
HPC classified Turnaround Management into two broad categories. They are:
1. Strategic Turnaround
As the name itself suggests, strategic turnaround choices may force the company to completely change its current way of operations. The choices under this method are
- A new way to compete in the existing business
- Entering into an altogether new business
2. Operating Turnarounds
Basically they are of 4 types and the strategy adopted depends on the various situations in which the firm is :
- Asset reduction strategies
- Revenue increasing strategies
- Cost cutting strategies
- Combination strategies
Phase III: Implementation of the change process
Implementation plays an important role in any turnaround management. Identification of an appropriate strategy by itself will not guarantee success. Similarly partial adoption of a strategy is also not useful. The selected strategy needs to be pursued relentlessly and with all-out effort to make it work. The success or otherwise of a Turnaround strategy depends on the commitment shown by the top management as also the operating management.
HPC’s business recovery professionals are valued by clients for their ability to quickly identify problems, gain cooperation, develop viable solutions, and implement them with sensitivity and precision. Our experienced teams offer a full range of advisory and implementation services, from turnaround and restructuring plans to optimised exit strategies.
