Business crisis

One of the tasks of CARAVATI PAGANI’s team of experts is to assist clients in the management of corporate crises.

When we speak of a corporate crisis, we are referring to an exogenous or endogenous event of such magnitude as to risk compromising the business continuity of a company. In the presence of such a condition, often unexpected and sudden, it is essential to immediately put in place the necessary procedures to safeguard the company’s reputation. These procedures follow a series of standard schemes that constitute crisis management. Thanks to the skills of our experts in this field, we are able to intercept even weak signs of crisis in time. Only those who have the right training can identify an optimal crisis management strategy.

THE KEY POINTS OF CORPORATE CRISIS MANAGEMENT

A business crisis situation must be addressed with an immediate operational response. The main points in responding to a state of insolvency are:

• speed in the management of communication flows within organisations and between stakeholders;
• skill and competence in optimising technical and professional resources, in order to launch a business recovery plan.

The financial crisis is a testing moment for the company regardless of its size and shows the real organisational capabilities of the actors involved.

In order to be prepared for any eventuality, it is necessary to have:

• a background of knowledge about the environment
• adequate strategic planning;
• constant preventive simulation of the various company crisis scenarios.

The business crisis and the business recovery plan

A company crisis can be an opportunity to redefine and revise or strengthen the company’s objectives and coincides with a moment of change for the organisation. Several options can be adopted to respond to the state of corporate crisis:

• by opening up new networks of relationships with people and organisations,
• reactivating previously established links.

The crisis situation can therefore also become a source of opportunities if it is properly managed from the beginning.

Unfortunately, a company in liquidity crisis may also have to resort to drastic and extreme solutions such as dismissal due to a company crisis. In this case, it is also essential to proceed in the right way and at the right time, availing of expert advice.

CORPORATE CRISIS MANAGEMENT: KNOWING THE RISKS

There are many factors that can expose a company to the risk of a crisis. In order to prevent a crisis from occurring, it is important to know and avoid them. Some of them are summarised below:

• questionable financial practices
• incorrectly managed reorganisations or redundancies,
• mechanical failures,
• technological debacle,
• human error,
• natural disaster,
• sabotage,
• external attacks,
• corruption,
• communication system crashes,
• serious trade union or political problems.

During a corporate crisis, the fast pace and rapid succession of events often result in an information gap. The proper dissemination of correct information on the state of progress of the company’s crisis management procedures is of great importance.

Crisis management should preferably be entrusted to professional figures, i.e. crisis managers. The experts present at CARAVATI PAGANI are able to integrate the wide range of knowledge necessary to ensure the positive development of a crisis management.

The importance of communication in a company crisis situation

One of the main purposes for a company in crisis is to regain credibility and trust. After identifying and understanding the problems, it is necessary to reassure the individuals affected by the crisis. The causes of the situation must also be identified to prevent it from happening again. Often the best attitude on the part of the company is to admit responsibility and acknowledge that something that should not have happened has happened. It is very important to show empathy, understanding and sympathy for the worries of others in order to strengthen the fiduciary bond. One of the priorities for crisis managers is to consolidate their authority. Some key points to achieve this are

• continuously informing about the status of crisis management,
• being accurate in communication,
• admitting possible ignorance,
• communicating how you are looking for missing information,
• not telling falsehoods.

PERSONALISED CRISIS MANAGEMENT ADVICE

The first step in overcoming a state of crisis is to make a correct diagnosis. The causes of the crisis must be identified and the degree of severity of the crisis must be determined. The difficulties that generated the crisis can be related to:

• inappropriate performance, which should be identified by comparing the recent results of the company’s activities with its historical results;
• declining performance compared to the trend of competitors and the sector to which the company belongs.

Any business recovery plan must estimate the duration of the crisis situation and the level of deterioration of the company’s economic and financial balance.

There are numerous reference models and intervention schemes for managing corporate crises, but it is very important to avoid excessive generalisations and overly standardised approaches. CARAVATI PAGANI guarantees a contingent, specific and case-by-case approach.

CORPORATE CRISIS MANAGEMENT FOR FOREIGN CLIENTS

Crisis management must be carried out in the best possible way also in the event that the business crisis involves foreign investors or foreign companies. Thanks to the competence of our staff in international tax matters, we can support foreign entrepreneurs in the management of the corporate crisis in Italy. Our crisis managers will promptly carry out the correct diagnosis for the foreign client, in order to put in place the appropriate procedures to safeguard the company’s reputation.