As the world gradually gets to grips with the global pandemic, there are encouraging signs ahead. But as we assess the road to recovery, it is important to remember that different markets and different sectors are at very different stages in their journey.
Generally speaking, Europe is opening back up for business. The UK took a major step forward on May 17 and Italy has also turned a corner. However, the current COVID situation in India, Brazil and many other nations remains a major cause for concern.
Businesses have faced many other challenges. If you need an example of an individual 2020 experience, look no further than Australia. In the last eighteen months the country has had to deal with devastating bush fires and floods as well as the pandemic. In helping middle market business leaders to manage risk, improve decision-making, drive productivity, enable change and realise value, a bespoke approach is needed for each challenge, specific to that market. National Head of Restructuring and Recovery at RSM Australia, Greg Dudley explains: “We have different speeds in economies, different industries, different places and different issues - all of which requires a tailored approach. Our job is to help companies analyse their business model and make the structural changes required for any given situation.”
“In Australia, all government support finished at the end of March which means that at the moment certain businesses have cash flow issues. We are helping these businesses to manage the cash flow issues, but of course that differs by sector. Whilst production and mining are doing fine, other industries are really up against it. It’s the same with different states where Western Australia, New South Wales and Victoria have all had very different COVID experiences. With Australia being a net importer, we also have the closed borders issues. So, we’re a long way from one size fits all.”
Of course, there have been political changes too. RSM Italy partner Raffaele Salese headlines the changing landscape in his market: “There have been two very distinct periods – the one before our new Prime Minister Mario Draghi and then a very different period since he took up office in February this year. We now have a solid recovery plan underway and a fund of 255 million euros available. This will allow companies to pivot and grow into better opportunities and our restructuring expertise can help them do that. It’s never been more important for us to stay close to our clients so we can help them make the right decisions at this critical period. In Italy at least, the way forward will be driven by digital transformation, green transition and construction and development.”
In the UK, Chairman of RSM Restructuring Advisory Graham Bushby is keen that government support doesn’t lull business into a false sense of security: “Companies have taken advantage of government schemes and the good will of creditors and the banks. However, this can mask their current performance and potentially create an artificial impression. You may not be trading very much but with the extra support you could, on the face of it, be showing a good profit. However, at some point, all that money has to be paid back. One of the things we are seeing at the moment is supply chain issues, worldwide. COVID has put a lot of ship containers in the wrong place so logistics are complex and challenging. With production levels generally down and demand being constantly switched on and off, it has created significant issues, which we are helping clients to navigate their way through.
“We’ve been on a real journey with COVID. In the early days, our role was purely advisory with a focus on forecasts and help from the government or creditors. After that, it was about a reality check. In the UK, formal appointments and formal insolvencies were at a 35 year low because of all the support. In the last three or four months, there has been a lot of solvent restructuring – governments are expecting tax changes so organisations are preparing for change.”
The COVID recovery journey will continue at different speeds for different sectors and different markets. Businesses will need to stay vigilant, forecasting and monitoring cash flow and importantly keep a line of strong communication with the full range of stakeholders, from investors to their advisers.
For more information on how RSM are assisting businesses on their road to recovery, please contact us.