Impact Partner Content: Absa / by Hwalani Mabaso, Provincial General Manager: Distribution, Relationship Banking, Absa
The Covid-19 pandemic has left many businesses distressed, with some businesses scrambling for survival. It’s important for any business to think of business resilience during Covid-19 and post. If your business is currently in distress it’s crucial to first assess the situation and develop a practical insolvency plan and avoid any false movements which can ultimately impact the business performance.
Hwalani Mabaso, Provincial General Manager: Distribution, Relationship Banking, Absa
With this unique environment businesses must focus on turning things around swiftly through cash stabilization, liquidity as well as a clear realistic view of the status quo in the business. A solid stakeholder management plan must be put in place while there is focus on identifying opportunities for strategic, operational, organizational and financial change. This can be achieved through identifying options, steadying the business financially and understand the risks and costs of each option, including contingency plans.
Secondly it’s important to implement strategies to overcome the financial difficulties. Businesses at this time are in need of additional resources to rebuild confidence. Through clear communication and seeking to understand the needs of various key stakeholders such as lenders, shareholders and suppliers, it can be easier to stay on top of issues and make informed decisions. Subsequently, businesses should try and access short term liquidity requirements while finding ways to preserve value and address potential risk to stability. Stability should be the main focus for the business with frequent assessment of pitfalls or mistakes and clear plans on how to fix the issues experienced. Furthermore, during this time businesses should continuously negotiate with stakeholders and monitor the business during this difficult time.
Lastly, business should also prepare themselves that a distressed situation can continue and require more drastic steps and actions. This can include going through and investing time in understanding the formal business rescue process and its implications. This can be achieved through the five key recovery scenarios:
Distressed business: understand the extent of the problem
Insolvency planning: identify your options
Commencing business rescue: understand what happens in a formal process
Implementation: find ways to maximize value
Exiting a formal process: plot a path back to 'normal'
