One of the key failures insolvency advisors make in distress situations, is too much focus on the restructuring of the capital structure without reference to the continuing operational changes being made by management.
Management’s on going changes to the operations and the cultural impacts of those changes i.e. redundancies and asset exit strategies will further exacerbate the financial position and put the capital and debt structure further out of alignment with the business.
The SICS™ Guide was designed by Olvera Advisors to be used in any form of transformation or restructuring assignments. It has specific focus on distress situations where companies are in an extended liquidity crisis and directors are concerned about their company’s continued ability to trade.
Olvera’s SICS™ Guide for management of companies in distress is set out in four phases:
This phase focuses on two core resource issues necessary to stabilise a company sufficiently to allow for a more detailed diagnostic to take place. Firstly, the fundamental ability of the current management team to create, plan and execute any change transformation while maintaining stakeholder confidence both internally and externally, and secondly the ability of the company to generate the liquidity necessary to underwrite any operational or financial transformation.
This phase focuses on the diagnostics to assist a clear understanding of the issues the company is facing. A methodology for carrying out this diagnostic work is set out in this section. The SICS™ Guide provides a framework for carrying out a review of the company’s markets and operations (including its management capability) and for preparing financial analysis. It also provides techniques for converting the findings into a documented restructuring or transformation plan.
This phase focuses on stakeholder identification, responsibilities, relationships and messages. These include the cultural change programmes necessary to align and engage internal and external stakeholders in the transformation process.
The output of any transformation process is an executable plan to deliver the identified courses of action. The SICS™ Guide deals with the review of forecasts, sensitivity analysis, financial and business modelling and drawing up contingency plans to the restructuring programme.
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