Execution & Risk Mitigation
Execution & Risk Mitigation
When a key supplier, customer or even a competitor fails, this can create significant immediate business continuity challenges.
Yet this initial adversity can often mask the opportunity for strategic growth. With appropriate professional insolvency and restructuring advice, you may be able to unlock possibilities for transformational change.
Our expert team can help you add significant value, minimising initial loss exposures and maximising the longer-term opportunities.
Whilst we work with businesses to help develop early warning alerts of potential issues and develop workable contingency plans, we can also support businesses where third party failure does occur unexpectedly.
Critical Supplier Failure:
In the short-term, businesses will need to look at alternative options for replacing supply, and how to manage disruption to assembly lines, customer deliveries etc. Depending on the nature of the business, it may be necessary to look at work-in-progress and unfulfilled orders sitting in supplier premises, which can be acquired in order to manage business continuity. Finally, managing recovery action from the joint administrators or liquidators is a requirement which, depending on the complexity of the situation and jurisdiction of the supplier, may require specialist support.
Over the longer-term, there may be an opportunity to acquire the business or assets from the appointed administrators or liquidators, creating vertical integration and improving overall profitability and supply control. In the event the failed supplier is taken over by another entity, there is the possibility to use that opportunity to negotiate improved contractual terms.
Critical Customer Failure:
The most pressing requirement is to minimise loss as an unsecured creditor – this may be through asset recovery via Retention of Title clauses through to potential recourse to credit insurance. It’s also necessary to look at the immediate liquidity or funding impact it may have on the business, and if any work-in-progress or unfulfilled orders can be otherwise utilised. Finally, it is necessary to navigate the new obligations placed on suppliers under the Corporate Governance & Insolvency Act 2020 regarding continuity of supply to companies subject to insolvency proceedings (the ipso facto regime). To navigate this safely requires specialist advice.
Longer-term, there may be opportunities – identifying the failed customer’s customer may actually create a new direct trading relationship. It may also be possible to acquire elements of the customer’s business and assets – however buying assets via an insolvency can itself be time-pressured and require suitable advice.
Over the short-term, developing a strategy to contact customers of the failed competitor will be critical. Depending on the nature of the sector or product range, there may be a sudden spike in demand and managing this ‘first impression’ to new customers is vital.
Over the longer-term, there may again be an opportunity to acquire the business or assets from the customer’s insolvency practitioners. It may be possible to secure the services of key personnel.
We work with clients to consider how supply chain risk is identified, quantified and mitigated. Whilst each situation is typically different when it comes to mitigation this may be as simple as advising on what information from the supplier to keep monitoring and how often this should happen through to contingency planning, or in more extreme situations being prepared to step in and take control of the supplier in order to ensure production lines keep operating.
We have extensive experience of these high pressure, often high stakes situations. We typically help clients adopt the most appropriate approach for the situation and where necessary assist with the financial or operational analysis or the negotiations if financial support or a transaction is needed.
Clients are also reassured that we remain focused on the core objective – whether that is to keep the supply of parts or materials going for a shorter period until such time that supply can be switched or to investigate and negotiate a longer term “fix” for the problem. What is common to all situations is the need to minimise the impact of supplier disruption – whether it is financial or non-financial in nature.
Our involvement also typically brings a degree of comfort to stakeholders and through that further stability – when we commit to doing something it happens, and when we undertake actions we do so without delays.
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