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Introducing the Chief Restructuring Officer (CRO)

Although recognised as key members of the turnaround profession in both the USA and Europe for some time now, the role of the Chief Restructuring Officer is a relatively new concept in Australia.

 

Anyone who has been involved in the turnaround of a business will appreciate the magnitude of the project facing management.  Expert advice and depth of experience are essential in managing a successful restructure, which can often take many months, or even years to execute.

Although traditionally the domain of external advisors, managing the turnaround of a business is often more effectively performed from within the organisation itself, and hence the emergence of Chief Restructuring Officers (CROs).

Historically in Australia there have been few alternatives available to companies in financial distress, the most common being a formal insolvency process, which often results in little or no benefit to either the business or its stakeholders.  The role of the CRO provides management with the opportunity to appoint a professional to take charge of developing and / or implementing the restructure plan whilst allowing management, to concentrate on managing the core business.

he main objectives of a CRO are to:

  • Make the difficult determination of defining the company’s business within a compressed time frame.
  • Provide an objective assessment of the business.
  • Develop a comprehensive restructure plan.
  • Project manage the implementation of the restructure.

This generally involves:

  • Working closely with the Board, CEO and Management.
  • Initiating, coordinating and implementing restructuring initiatives.
  • Leading negotiations with lenders, creditors (and their insurers), shareholders, employees, unions and other key stakeholders.
  • Providing expertise during the transition period.
  • Playing a key role in rebuilding and / or maintaining stakeholder relationships.

The scope of restructuring often includes non-core asset / business sales, working capital management, capital raising, revenue improvement and cost reductions, refinancing and liaising with government and industry regulators.

The following diagram illustrates how a CRO integrates into a company’s organisation structure:

When the situation has stabilised, the CRO then focuses on training the Management team to ensure that the lessons learned and solutions are sustained by the management team long after the CRO’s involvement ends.

With Australia’s economic outlook still uncertain and expected to remain so for some time, we foresee many opportunities for CRO’s to guide companies through the tumultuous times ahead.

 

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