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Managing Downturn
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Managing Downturn

 

Mastering Essentials of Downturn

 

 

Here is an overview of the basic Essentials while economy goes downturn that TFAGroupwill address for you:

 

Indicators: Indicators showing the beginning of a crisis, which can be caused by external and/or internal factors. Issues and solutions Set:


Possible symptoms of a crisis

The underlying problem

Decrease in revenue

Loss of customers or employee

Insufficient profitability

Negative cash flow

Not enough liquidity

 

Turnaround situation are often caused by external and/or internal factors:

Possible external factors (market view):

  • Change in market regulations

  • Change in buyer behavior

  • Increase completion and rivalry

  • New market entrants or disruptive technology (new substitutes)

  • Increase dependency of main supplier

 

Possible internal factors (company view):

  • Inappropriate strategy (e.g. product portfolio)

  • Inefficient product and/or non value-added activities and processes

  • Excessive complexity in the value chain

  • Organizational design does not fit current needs

  • Extraordinary events (e.g. warranty case)
 

 

Level of crisis defines remaining range of actions

 

Fundamental paradigm

·         The earlier the crisis is recognized, the broader is the range of actions available.

·         The sooner restructuring actions are taken, the higher is the probability of success.

·         The longer actions are delayed, the more urgent and dramatic measures will be.

·         In a financial crisis a lot of curtail management resources will be absorbed by short term liquidity / equity stabilizing measures and stakeholders management.

 

Root cause of crises

TFAGroup expertise and experiences helps you as early as possible to identify the level of crisis defines remaining range of actions. Qualitative symptoms are difficult to detect but provide earlier warnings than quantitative figures. Quantitative symptoms can be observed only with a delay but detection can be automated. Financial and operational figures should be benchmarked against the industry.

 

 

Turnaround management approach and the main challenges

TFAGroup has a tailored turnaround service to specific challenges of our clients. The turnaround essential 7 Steps are:

1.    Business review: as is analysis of company, development of restructuring options.

2.    Operational restructuring: identification of actions to regain / maintain profitability.

3.    Balance sheet restructuring: identification of actions to regain / maintain healthy equity/dept situation.

4.    Working capital management: optimization of creditors, debtors and inventory to increase liquidity and reduce capital employment.

5.    Contingency planning: development of fall-back options and definition of trigger points.

6.    Stakeholder management: stakeholder management concept to align diversity of interests.

7.    Evaluation of exit-scenarios (decreased-sale, wind-down, liquidation) for companies and parts thereof.

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