What Does the New Economic Landscape Mean for Business Health in 2022?

As we emerge from Covid-19 into turbulent financial times, insolvencies are on the rise and businesses are under pressure. Will the number of distressed companies increase this year – and what can they do to ride out the storm?

Rising inflation and interest rates. Changing consumer behaviours and psychologies. Evolution of markets. New platforms. All the ingredients for a financial storm are brewing. And the number of distressed companies will increase this year, with those heavily in debt particularly vulnerable. 

Industries such as travel, leisure and hospitality have been hit particularly hard by Covid-19 and the ramifications are still being felt. While some have received government support, others have been considered too small to be noticed. Unfortunately, many of the latter have already ceased operations while many more are on the brink. Even those that have received support may experience difficulties as support continues to be withdrawn.

For surviving businesses, it will take time to regain their momentum. For those with viable business models, it’s unlikely that shareholders, banks and governments will easily give up on them. But we anticipate over the next few months that the weaker players will be forced out of the market, fuelling the growth of those that remain. However, they too will need to undergo significant changes to adapt and thrive in the new economic environment.

What can distressed businesses do?

Struggling companies should quickly turn to professional advisers for help because swift intervention may be the catalyst needed to save the business. Even those in a stronger position could benefit from independent, professional advice on how to restructure and improve their business in the new era. For creditors, paying close attention to debtor risk profiles is extremely important. Where signs of distress appear, creditors should proactively seek assistance from professional advisers and not hope that the debtor will address the issue themselves.

Perun Consultants specialises in helping turn around distressed companies and finding strategic partners and investors to support them. We assist lenders to maximise recoveries of distressed loans by acting as receivers or as liquidators to deal with an orderly wind down of distressed businesses and distribute the realised assets.

Contact us to find out how we could help you during these turbulent times.