From time to time, businesses go through periods of financial or operational distress. Business distress manifests itself in many ways, such as declining financial performance, missed budgets, delayed loan repayments, high employee turnover, or regulatory breaches.
Delayed action addressing distress can result in detrimental consequences for the business, employees, financiers, and other stakeholders. Effects can include loss of market share, regulatory sanctions, penalties, or the business becoming insolvent and ending in liquidation. In cases where the entity survives and continues operating, delayed action can increase remediation costs. Therefore, key stakeholders, often management, financiers, and regulators, must understand how to initiate or compel action when dealing with distressed situations.
It is crucial that key stakeholders adequately understand what is causing the business distress. Management can conduct the review. However, due to the multiple stakeholders involved, a third party is usually selected to conduct the review in the interest of independence and objectivity. Restructuring professionals call such a review an Independent Business Review (“IBR”).
Download to learn more