What Boards Must Know to Stay Afloat

This article from Company Director Magazine was first published December 2024, Volume 40, Issue 11. Full publication available at: https://www.aicd.com.au/news-media/company-director-magazine/all-editions/december-2024-edition.html

High interest rates, inflation and lingering pandemic effects are driving persistent financial strain and mounting cost pressures on Australian businesses. The road ahead could be bumpier than many Australian boards are used to, according to John Park, senior managing director and head of Australian corporate finance and restructuring at FTI Consulting.

“They’re facing higher inflation, rising interest rates, supply chain disruptions, global unrest and fundamental changes to the demands and wants of consumers,” he says. “Further, the emergence of new challenges such as cybersecurity, AI and big data have increased the workloads and mandates of directors and management alike.”

For some, insolvency is looming as a real — if shocking — possibility. “If the threat of insolvency is immediate, it’s vital you engage advisers who can consider all available options such as safe harbour and the prospects of a restructuring plan,” says Matthew O’Keefe, managing director at FTI Consulting.

“If the threat is emerging, remember that as you progress along the solvency curve from performing, to underperforming, to stressed then distressed, your attention and resources are increasingly diverted from core business operations and risk management.

Catching the falling knife early will be a lot less painful, so act quickly to engage trusted advisers, gain clarity on your forecast liquidity, identify and interrogate potential options, and quantify the financial, operational and human resources you’ll need to carry them out.”

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Reprinted with permission from Australian Institute of Company Directors, Company Director Magazine.