Covid-19 impact: Corporate recovery and insolvency
While ‘too big to fail’ came to represent banking’s achilles heel during the global financial crisis in 2008, a worry amid the current crisis – the coronavirus pandemic – could be summed up as ‘too small to survive’.
Small and medium sized enterprises (SMEs) are the backbone of most economies and they are also the most at risk from the Covid-19 pandemic. Unlike multinational companies (generally speaking), SMEs are exposed to greater liquidity risk, restricted credit lines, fewer cost-saving options and a lack of corporate experience and access to knowledge, among other things.
Talking specifically about his home country Ireland, Tom Murray FCCA, a director and corporate recovery and insolvency (CR&I) specialist at Friel Stafford, highlights how SMEs form the fabric of an economy: ‘SMEs account for over 99% of active enterprises in Ireland and 65% (over one million) of total employees, which increases to 68.4% when proprietors and family members engaged in the SME are included.’
Murray has worked in CR&I for many years, helping companies impacted by 9/11 and the financial crisis in 2008. ‘As with those events, [the coronavirus crisis] too will pass. However, the impact will be felt and many companies will suffer and some will fail.
‘At times of crisis a clear head is required. Business owners need to determine and assess the severity of their business situation and plot a way forward in the immediate weeks and months ahead.’
A career path to support those in crisis
As a career path, CR&I is a strong option. As the population of SMEs and entrepreneurs has exploded, so too has the need for CR&I specialists to help bring struggling companies back on track, or in the worst case scenarios, wind up a failing company.
‘Similar to a medical professional, whose role is to help patients suffering from illness to recover, the role of CR&I is an important one,’ said Chan Joo Kee ACCA, corporate recovery associate at MIRAI Consulting in Singapore. ‘Given that Covid-19’s impact on business is still yet to be fully comprehended, it’s vital that businesses reach out and seek assistance from the corporate recovery professionals.’
In general, to become a corporate recovery and insolvency specialist you will need the ACCA Qualification, a minimum of several years’ experience to become grounded and extra qualifications, such as the Joint Insolvency Examinations Board exam in the UK, are also advisable.
There is a great deal to learn. CR&I is highly technical, requiring forensic-like analytical skills and a broad knowledge of businesses and sectors, accompanied by a legal mind: ‘We work in an arena where the worlds of accounting and law intermingle and blur frequently,’ said Murray. Furthermore, you’re working with people, such as struggling business owners, who are under great strain, so you need to be able to communicate effectively and reassuringly.
But the rewards are worth it, both financially, with competitive salaries that increase significantly with experience, and professionally, for example, helping small business owners avoid insolvency and return to financial health.
Beyond this, as well as a path to partner level in accounting practices, a career in this field can lead to roles in industry, as you’ll be equipped with a strong set of practical business skills and a thorough understanding of corporate governance issues. You’d also be well equipped to become a business owner yourself.
Joo Kee’s key CR&I skills
‘You need to communicate with a variety of stakeholders (eg employees, creditors, government authorities), both orally and in writing, for example, preparing letters, reports or other forms of written communication for relevant government authorities and stakeholders.’
‘You need to know the available legal business recovery options, for example, judicial management and scheme of arrangements. If efforts to recover do not succeed, you may be tasked with liquidating and closing a business. The CR&I role is heavily governed by a variety of acts.'
‘You see a lot of numbers and figures, and you need to analyse them to try and understand what is going on or what has happened to a business. You also look at various documents, such as legal agreements and contracts, to understand more about the business and its current situation.’
‘You usually juggle a portfolio of cases. Each of these will have its own deadlines, such as filing documents with the relevant authorities, or preparing meetings with stakeholders and creditors. You need to prioritise and manage your time well in order to meet these deadlines.’
Neil Johnson, journalist
This article was first published in Student Accountant in May 2020