Stabilising the distressed company
Stabilisation characteristics
When a turnaround enters the emergency management stage, good turnaround management practice dictates that the turnaround leadership team must swiftly take control of the situation.
"Securing the survival of the business."
Core to emergency management is securing the survival of the business through measures for the management, conservation and generation of cash (see box on the right).
"Window of opportunity."
In doing so, it provides a window of opportunity for:
- More in-depth analysis and further development of solutions identified during turnaround situation assessment for purposes of fixing the business through corporate renewal (see turnaround plan refinement).
- Developing a refined business case for raising finance (see funding the distressed company).
Stabilisation is further achieved by reintroducing predictability to the operations by setting performance targets, establishing information systems, and tracking progress.
Lastly, stabilisation ensures legal and fiduciary compliance under circumstances where corporate governance often has been neglected or are deteriorating.
Stabilisation requires a rather autocratic leadership style to impose discipline and conformance to new systems and controls.
Internal stakeholders affected by or who can influence cash management and other emergency initiatives need to understand the new priorities, new procedures and what is expected of them.
External stakeholders need to see that their interests are being preserved.
Stakeholder support is addressed by demonstrating control, and ensuring that promises are adhered to, especially achievement of short-term objectives and cash flow forecasts.
Discipline is required to handle the complexities of timing, resources required and cost associated with the various activities constituting the planning and execution of the turnaround (see turnaround project management).
Stabilising the distressed company is both a turnaround strategy component and a turnaround stage in its own right.
For more information please see emergency management as a turnaround stage.
Crisis stabilisation is a specialist field best executed by an experienced turnaround practitioners.