How to identify risks and foster resilience in times of distress

A rapid assessment of a business experiencing distress enables shareholders, management, and key customers or suppliers to quickly identify risks and implement timely countermeasures, helping to preserve value and protect the interests of all stakeholders.

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Identify and mitigate risks

Ongoing geopolitical conflicts have created a highly uncertain environment marked by elevated energy prices, higher financing costs, and weakening demand.

These conditions are increasing stress across parts of the corporate sector, resulting in higher levels of bad debt and delayed collections, and contributing to continued rise in non‑performing loans. In this tightening economic climate, it is critical to identify business risks early and develop effective mitigation strategies.

Risks can arise in various areas and differ in nature and complexity. Therefore, it is recommended to perform a holistic analysis including the following key aspects:

Operations

Inefficient operations can drive excess costs or unutilized capacity, resulting in reduced profitability or negative cash flow.

As processes evolve and business conditions change, misalignment between operations and strategy can emerge, weakening effective and profitable execution.

Benchmarking industry‑specific KPIs against peers helps identify operational inefficiencies, structural risks and value‑creation opportunities
Financials
Monitoring the right financial KPIs can give you early warning signs of imminent distress, such as:
- Decrease in sales
- Liquidity constraints
- Deterioration of margins
Understanding the key drivers of the historical performance and development over time helps to identify challenges and opportunities for improvement.

As business performance is ultimately reflected in financial results, it is essential to focus on the right levers to restore and sustain healthy financial KPIs.
Market and competition

Emerging trends and technologies, such as AI, are accelerating product and service disruption, placing pressure on traditional offerings and potentially leading to short-, medium- or long‑term declines in revenue and competitiveness.

Assessing market dynamics and competitive positioning can highlight the need to refine the marketing strategy, product portfolio, and/or operating model.

For established businesses, an outside‑in perspective can provide valuable, fresh insights.
Tax and legal

The tax and legal framework is often overlooked or treated as a compliance‑only exercise. However, the accuracy and effectiveness of legal agreements, corporate structures, and business licences can be critical to business success. Furthermore, changes in legislation or regulatory requirements can materially impact operations and financial performance.

A thorough assessment of current obligations and upcoming changes can identify tax enhancement opportunities, enable the use of available reliefs and incentives, and help avoid penalties ranging from financial fines to the loss of operating licences.

Rapid business assessment as a tool

A rapid business assessment helps identify potential risks before they materialize and impact performance, while also uncovering value‑creation opportunities that enhance resilience against adverse external conditions.

Such assessments extend beyond a company’s own operations and can be equally valuable in evaluating the resilience of key stakeholders. In dependency‑driven situations, assessing the reliability of business partners is critical to mitigating spillover risks that could disrupt a company’s operations.

Contact our Turnaround and Value Creation experts if you want to understand more about the benefits of a rapid business assessment or are interested in any of our service offerings.