Opportunities and challenges for insolvency practitioners in the age of COVID-19

As the COVID-19 situation increasingly impacts Australians, a growing number of businesses may need the support of trusted insolvency and business restructuring specialists. That may mean it’s time to make sure your business is ready to take on new work, in an unprecedented business environment.

In an uncertain business environment, the skills of qualified insolvency specialists are set to be increasingly in demand.

Recent Macquarie Bank insolvency industry benchmarking research found demand for insolvency and business restructuring services was rising before the COVID-19 crisis hit, with two in three firms saying their business outlook was positive.¹ And while the final fallout from COVID-19 is still hard to gauge, it’s clear that the impact on corporate Australia will likely be significant, with thousands of businesses closing their doors,² and Federal Treasury forecasting that at least 1.7m people will soon be reliant on the newly introduced Coronavirus Supplement.³

Although the government’s proposed changes to insolvency laws may bring welcome relief to some struggling businesses, it’s also possible they may simply delay the outcome. According to Terry van der Velde, Managing Director of SV Partners, “where you may have seen a tsunami almost immediately, I think you’re now going to find it’s two to three months down the track.”

So, what could you be doing now to prepare your business for the opportunities and challenges that lie ahead?

Staff shortages and technology adoption

One potential challenge for firms facing increased demand is the ongoing shortage of skilled people across the sector. During the recent contraction, 61% of insolvency firms lost staff to other sectors, with 29% saying better remuneration was a key motivation, and 14% citing workplace flexibility as an issue.¹

While that exodus may be partially reversed in the months ahead, it’s important to move rapidly to support and mentor your staff, equipping them with the knowledge and skills they need to maximise productivity, while nurturing your clients through the current crisis. This may be a real challenge, as teams work remotely or across multiple projects.

Technology is also a potential issue for many firms, with 86% of insolvency practitioners saying efficient utilisation of technology remains a core challenge – one that will become particularly pertinent in an environment that requires many staff to work remotely.¹ Firms that move rapidly to update their technology to drive productivity, add capacity and automate low value tasks could gain a valuable competitive edge as the crisis unfolds.

However, increasing demand could also bring cash flow challenges that firms need to be prepared for. According to Van der Velde, “Firms like ours get paid from the assets that we realise. So if you've got a large number of cafes, restaurants, pubs, clubs, closing and not able to re-open, we're going to have a flood of surplus equipment on the market. Who’s going to buy it?”

“We may be busy, but how do we get paid?”

5 steps to success in the age of COVID-19

1. Reach out now to potential clients and educate them about your role as advisory and restructuring experts, and the value of seeking advice as early as possible
2. Provide an easy to access repository of considered information about the impacts of the crisis and the support available from state and federal governments, banks and other specialists
3. Ensure your staff are equipped with the knowledge and relationship skills needed to nurture businesses through the downturn
4. Re-assess and enhance your technology suite, to ensure it not only supports efficient remote working, but also a supportive client experience
5. Ensure you have the cash flow and working capital reserves required to operate in an environment where it may take longer to realise the value of business assets, or where assets may be significantly undervalued.

How Macquarie can help

The Macquarie Insolvency team is here to help you, with personalised support, delivered by industry specialists.

To find out more, contact your Macquarie Relationship Manager, call 1800 442 370, or visit macquarie.com.au/business-banking/insolvency-industry.html