Turn Around Management / Financial Crisis Management in Small Enterprises

This strategic training programme provides managers of small enterprises with a strategic and structured framework for financial crisis management. It uses the concept of the turn-around curve, together with strategic analysis such as Porter’s Value Chain and Competitive Advantage models, as well as financial analysis and risk analysis. By the end of the programme and the company visit, managers should be able to understand and develop a financial model for their firm and take appropriate measures for crisis management and turn-around management.

The 2020 coronavirus / COVID-19 pandemic caught governments and enterprises by surprise. The draconian measures implemented to stop the spread of the virus included a full shut-down of entire sectors of the economy, including hotels, restaurants, non-grocery retailers and many others.

Small enterprises have been badly hit by the crisis. Small enterprises in any case have been hit by a number of structural factors in the economy, including

• generational change;
• declining profit margins due to large competitor entry;
• oversaturation of suppliers, including too many competitors in each segment;
• limited access to talent and technology;
• rising input costs, primarily of facilities (rents) and staff, caused by the property boom;
• declining innovation.

The result is that while they can operate under normal circumstances, a “Black Swan” event of the magnitude of the COVID-19 crisis causes existential damage, leading to thousands of small enterprises shutting down.

TRAINING OBJECTIVES

As a result of participation, managers should be able to:

1. Assess the enterprise risk in their standard operations. Understand different sources of risk—technological, competitor, customer—and understand their vulnerability levels.
2. Understand how to spot an emerging crisis and measure its severity. A crisis is part of the risk assessment framework, but is usually one order of magnitude worse than standard risk in standard operating conditions.
3. Understand their corporate value chain, including financial and non-financial metrics of competitive advantage. This requires the deployment of strategic analysis tools such as Michael Porter’s Value Chain and Competitive Advantage models, but also bridging the gap between these and financial profit centre analysis (see below).
4. Understand the basics of a profit-loss statement, including cash flow and balance sheet impacts.
5. Develop a profit centre approach to operations. This involves defining their value chain into operations, and then assigning income and costs into operations. This is also known as a profit centre approach. It includes the allocation not only of direct costs but also overhead costs.
6. Developing strategies and tactics for turn-around management in a structured and coherent manner.
7. Improve their ability to manage profitability, risk and crises.

CASE STUDIES & METHODOLOGY

The following cases and tools are provided in the current seminar:

1. Porter Value Chain Analysis
2. Porter Competitive Advantage
3. Turn Around Management
4. Financial Reporting: PL, BS, CF
5. Development of Dynamic Financial Modelling
6. Cost Cutting Methodologies
7. Revenue Growth Methodologies
8. Customer Profitability Analysis – Net and Gross
9. Product Profitability Analysis – Net and Gross
10. Overhead Cost Allocation Methods
11. Break-Even Analysis per Customer, Order
12. Calculating the Cost of Capital Employed
13. Risk Analysis
14. Sensitivity Analysis

CONSULTING VISIT 

Each participating company will have a 1-day company consultation by the trainer. This visit is used to amplify and customise the training content. The in-company training will follow a structured framework and will be implemented together with each management team. Key elements of the visit include:

• To assess and evaluate the current situation in each participating enterprise including their marketing budget, marketing priorities and current online and standard advertising activities;
• To implement and reinforce, via practical methods and tools, the seminar content based on the needs of each enterprise;
• To support each enterprise in selecting the appropriate strategies, tools and methods in order to implement a results-based online advertising campaign;
• To support each enterprise to develop a Digital Advertising Action Plan.

TRAINING FEE

The cost of the training is covered by the Human Resources Development Authority of Cyprus (HRDA). Value-Added Tax may apply to your participation, and will be calculated by the Cyprus Chamber of Commerce and Industry based on the number of participants from your enterprise who will attend the training, and their gross salaries.

TRAINER

The trainer is Philip Ammerman. Philip is an experienced consultant and entrepreneur who has advised companies through a series of catastrophic downturns as well as high growth periods. He has worked through the 1998 Russian sovereign debt crisis, the 1999-2000 dot com crash, the 2000 stock market crash in Cyprus, the 2008 banking crisis, the 2010-2018 Greek debt crisis, the 2013 Cyprus bail-in crisis and the current COVID-19 Pandemic. Philip is an experienced investment advisor and has advised on over 120 business plans, corporate restructurings, mergers and recovery plans worth over € 6 billion. He is also highly experienced in the tech sector, including both start-up evaluation and development, as well as areas such as digital transformation and online marketing. 

AGENDAY DAY 1: VALUE CHAIN ANALYSIS AND PROFITABILITY 

Introduction

Programme Objectives & Learning Outcomes

Financial Crises: Types and Impacts

• The 2000 dot.com crisis in Cyprus
• The 2008 global financial crisis
• The 2013 bail-in crisis
• The 2020 COVID-19 crisis
• Typical impacts on small enterprises
• Duration, timing and warning signs

Risk Management

• Understanding risk management, including systemic risk, competitor risk, technological risk, customer risk, “acts of god” (fire, flooding, disease, war), and black swan events
• Financial and probability modelling risks, chances of occurring and impacts on the enterprise
• Risk mitigation methods (introduction) and quantification skills
• Crisis management introduction

Coffee Break

Operational and Financial Modelling of Corporate Value Chains and Profit Centres for Small Enterprises

• Value stream mapping: from raw materials to final consumption
• Porter Value Chain Model; Porter Competitive Advantage Model
• Porter Five Forces Model
• Integrating strategic analysis with risk assessment and corporate profit/loss
• Understanding key indicators in modelling: speed, processing steps, defects, quality, time to payment, discounts/rebates, etc.

Lunch Break

Modelling Corporate Finance through Operations and Profit Centres

• Quick introduction to the P/L, CF and BS statement
• Splitting management accounts into profit/loss centres
• Methods for measuring sales & gross profitability per customer
• Developing the profit centre approach using finance and operations analysis
• Understanding break-even in operations
• Understanding other key metrics, such as break-even per order
• Examples / case studies of profit centres

Coffee Break

Measuring the Cost of Sales

• Modelling workflow in a company: what steps create costs? Value?
• Calculating average break-even per order; per delivery
• Differentiating statutory P/L statement
• Allocating overheads by work share, SKU orders, other metrics
• Methods for measuring net profitability per customer

Case Study: Measuring Net Customer Profitability in a Cypriot Distribution or Manufacturing Disguised Example (selected according to area of relevance to the participants). Three Methodologies will be shown during the training session

AGENDA DAY 2: TURN-AROUND MANAGEMENT AND FINANCIAL CRISIS MANAGEMENT

Turn-Around Management Diagnosis

• Defining the current status of profitability and business
• Outlining options for change – defining a turn around mgmt plan
• Sales and pricing scenarios and sensitivities
• Changing operations and business processes
• Developing management consensus
• Gaining external sources of finance: loans, grants, equity, etc.

The fundamental strategies to be discussed during all modules in this day are to cut costs versus increase sales. Both fundamental options are looked at in depth and inform the subsequent modules. Each option is designed to be modelled in the financial analysis completed in the previous day’s module.

Case Study: Quantifying the Turn-Around Management Process in a Cypriot Distribution or Manufacturing Disguised Example (selected according to area of relevance to the participants)

Coffee Break

Customer Segmentation and Pathways to Change

• Cutting Costs and/or Raising Sales
• Non-financial segmentation (potential vs. attractiveness)
• Financial segmentation (Pareto, A-B-C, x-y-z)
• Purchase characteristics and profiling
• Contract – order variability and sensitivities
• Relating sales and order profitability to turn around management – key indicators and means of optimising profits

Case Study and Methodologies: Segmentation and Customer Change Strategies from Cypriot Distribution or Manufacturing Disguised Examples.

Lunch Break

Optimising Production and Industrial Operations

• Producing to Order
• Lean and “Semi-Lean” manufacturing principles
• New methods of shared cost manufacturing
• Optimising profitability in manufacturing – relation with the turn-around management plan and key indicators.

Optimising Distribution and Logistics Operations

•  Physical Structure of Inventory Management

•  Shelf Space, Positioning, Flow

•  Stock Picking / Merchandising Planning

•  Delivery Effectiveness; Schedules and Route Planning

•  Relating distribution and logistics to the turn-around management plan and means of optimising profitability.

Case Study and Methodologies: Optimising Profitability in Manufacturing

Case Study and Methodologies: Optimising Profitability in Distribution

Coffee Break

Turn Around Management Planning: Summary of Measures

•  Making Decisions: Cutting Costs and/or Raising Sales

•  The 100-day Turn-Around Plan

•  Crisis Management Teams and the Role of the Chief Executive

•  Authorising Expenditure / Cutting Fixed and Variable Costs

•  Improving Sales / Improving Cash Flow

•  Managing and Mitigating Risk: Summary

Discussion & Conclusions