Early Intervention – Who Can You Help Today?

Michael Fingland

Executive Director and CEO

For too long the major mining companies and anyone who benefits from the continued boom have continued to talk up the totally implausible notion that China’s boom was just going to continue on forever.

Whilst I can’t blame business owners, management teams and the wider financial community for wanting to continue to believe in the China and Australian mining growth story, the denial has unfortunately delayed many companies and their management teams from taking necessary precautionary measures to safeguard their businesses.

The China slowdown is a reality and will have a significant impact on the Australian economy. Unfortunately, it will be too little too late for a large number of mining services companies, junior miners and other companies exposed to this decline.

Why business owners don’t seek help sooner

In 20 years’ experience of helping businesses solve their biggest challenges, I have learned that eight of the top 10 reasons why directors don’t seek help earlier to restructure their businesses are fear related.

The top three barriers to early intervention:

  1. A very strong sense of self-belief and overconfidence by management in their ability to solve their complex business issues. CEOs are quick to hire sales specialists to head up their sales team and CFOs to head up their finance team, but when it comes to formulating and executing a turnaround plan due to a significant downturn in the business, they try to do it themselves with little or no experience in this area. Astute Australian CEOs are following well-established practice in America and Europe by hiring Chief Restructuring Officers (CROs) to work alongside the management team to help develop and execute comprehensive financial and operational restructuring plans. They have also acknowledged that it is not a sign of failure to appoint a CRO.
  2. Pride and ego of the CEO or Directors.
  3. Denial and delusion. Many business owners are unable or reluctant to face up to what’s really happening in the business or industry until they are forced to. This is often at the point where significant damage has already been done to the business.

Breaking down the barriers to early intervention

Regulatory change in Australia will encourage a greater number of directors to seek help sooner. However, the most powerful and effective way to break down these barriers is for business peers, financiers, and accounting and legal advisors of these businesses to intervene.

As trusted advisors, they have an influential role in encouraging directors to seek the specialist assistance of a restructuring or turnaround firm, or appoint a CRO to assist them to navigate major business challenges.

The cost of such a decision should never come into it, as a good Turnaround Firm or CRO will deliver earnings and cash flow benefits of at least 10 times their fees.

Only until we as a wider business community take the time to ask the question—“Is your business okay?”—will the appointment of specialists in this area be seen as a positive.

How you can help

I call upon all directors, business owners, legal, accounting and financiers alike to take 10 minutes out of your day to think about your business peers, friends or clients and ask yourself whether you believe they could benefit from specialist advice.

Because of the strong fear-related barriers, trusted advisors are often the only person who will be able to encourage the director to acknowledge that specialist advice is not only warranted but will also solve their issues sooner. It will also make the job of the CEO easier and less stressful, plus improve the earnings and value of the business.

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