What ten years of Corporate Crisis Management has taught me

Heber Caramagna, Senior Turnaround Manager
September 2019

A few days ago, I was at lunch with an old friend (also a Management Consultant). Chatting about this and that, we kept coming back to how much our jobs had changed over the last ten years. In particular, how corporate crises have changed our roles as financial advisors. Then and there we agreed – rather superficially – on some common points. But it was only later that I had the chance to stop and truly reflect on our conversation and what crises have taught me.

About ten years have passed, so I’ll limit myself to one point per year!

1. The butterfly effect is real. Globalization has clearly demonstrated this on several occasions. Minor events that take place thousands of miles away can dramatically change the lives of our businesses.
2. Information is power! Never before has this been so true. Being in possession of strategic information is the first step. But it isn’t enough. Today we also need to fully comprehend it and capitalize on it quickly.
3. Risk free assets don’t exist. Everything can be subject to insolvency. A good manager is not necessarily one who generates value. Instead, they are the ones who minimize risks in the first place.
4. Even those companies who are performing well can struggle to find financial resources. Ratios make up only one part (sometimes even no-core) of the equation.
5. Debt can be a double-edged sword under conditions of unexpected stress. For this reason, even with a lower average cost, it is not always the best financing alternative.
6. An excess of unused liquidity doesn’t always indicate an inefficient capital structure. Of course, there is a cost attached to it, but in absolute terms it cannot be considered to be a waste.
7. Interest rates might remain negative for a long time. Not only that: this often is not enough to provide the right push to managers and entrepreneurs.
8. What is appealing to investors today might be not even be considered tomorrow. There are no rules engraved in stone. The price and value of a company can sometimes be conflicting.
9. Evaluating a company based merely on performance is a waste of time. Ignoring the risks to which the company is exposed means only looking at half of the equation.
10. A country cannot benefit from a solid financial system if its credit operators are unstable. The credit system within a country will never be stable if the companies who use it are also unstable. We are all in the same boat.

Find out more about KNET Project’s crisis team and turnaround management services here.