Businesses are poised to endure a tough 2009, with corporate results worsening by the day. How can they cope? Dan Schwarzmann, who leads PricewaterhouseCoopers’ (PwC) Business Recovery Services team, offers his top ten tips.
Mr Schwarzmann, 45, deals with the world’s biggest insolvencies and was last year appointed an administrator for top US investment bank Lehman Brothers, which filed for bankruptcy in September.
His job is to provide recovery advice and insolvency services to companies and individuals in financial difficulty.
He says he has experienced a significant increase in his work over the past few weeks. “Businesses are finding it difficult at the moment and 2009 is going to be quite a difficult year.” But, he says, there are ways to cope in the downturn.
1) Focus on what really matters
Evaluate which products and customers create or destroy value. Revisit your existing investment programmes — what initiatives could you stop or defer?
2) Remember: Cash is King
Ensure your finances are in order; protect your liquidity; re-examine your treasury, financing, funding and pension exposures. Monitor your performance against financial and non-financial covenants. Adopt a hands-on approach to cash management.
3) Act decisively
Make tough decisions early. The winners will be those who position themselves to take advantage of the upturn.
4) Take your stakeholders with you
Evaluate the likely impact of the downturn on your stakeholders. Make sure that you understand their agendas. Perception often amounts to reality, so maintaining regular and open dialogue is key.
5) Recognise the value of people
Regular and clear communication is vital. Develop appropriate incentives. Retaining the best people is critical to your future.
6) Take a closer look
Understand the true picture and not what you would like to believe. Understand what’s driving your business and how it is being impacted by the downturn.
7) Manage your costs
Go for targeted rather than across-the-board cuts. Look at your property, employee costs and discretionary spending. Does your business model need to change?
8) Reliable management information is key
Clearly defined key performance indicators are crucial. Decision-making needs to be based on facts and the speed of decision-making needs to improve.
9) Plan for different scenarios
The winners are those that are flexible. Model a range of financial and operational scenarios that reflect the impact of the downturn.
10) Take advantage of opportunities
Don’t stop investing in areas of growth needed for the future. Don’t forget your brand. Think beyond the next quarter.
Unpicking Lehman Brothers
“I was surprised that a company like Lehman Bros became insolvent. I wouldn’t have predicted that.”
“It’s an enormously complex job — probably the biggest insolvency ever — and has a long way to go before it’s fully unravelled. We are talking about many years.”
“With some companies, you would continue to trade from that company to maintain its value but with something like Lehman Brothers, when it becomes insolvent everything just crystallises. There is no trade to continue.”
“You are trying to understand the positions that existed at that time, collect new assets and pay off your liabilities and creditors. Right at the beginning of the job you have enormous intensity. You are trying to get everything stable.”
“There were initially around 400 people working on the case.”