Early Warning, Denmark


Description of the approach

Early warning is a national programme providing free, impartial and confidential counselling to Danish SMEs facing the risk of bankruptcy. Since 2007, The Early Warning programme has helped over 5.500 Danish SMEs to deal with severe economic challenges and helped keep alive about half of these companies.

The purpose of Early Warning is:

To help viable companies survive a severe slump and renew growth
To reduce economic losses for society, creditors and entrepreneurs by helping non-viable companies to close down quickly
To promote an entrepreneurial culture and help recognise failure as a natural part of entrepreneurial endeavours
To give bankrupt entrepreneurs a second chance by helping them to avoid unmanageable debt and loss of self-esteem so that they may start a new company within a foreseeable future.

The Early Warning organisation comprises 8 specially trained consultants collaborating with 15-20 insolvency lawyers and a group of approximately 100 voluntary advisers consisting of current and former directors of large corporations, owners of smaller companies, board members and chairpersons as well as a few professionals (accountants, lawyers, financial advisers, psychologist, coaches etc.).

The overall approach of Early Warning is as follows:

The Early Warning organisation receives a request for help from a company owner facing a severe economic crisis.
A consultant undertakes an initial screening of the company and provides an assessment of the economic situation and the future prospects of the company.
If the company can be saved, one of the voluntary advisers will be assigned to the company to support a turn-around of the company.
In case the future prospects are unclear or negative, Early Warning will organise a meeting with an insolvency lawyer to determine if the company can be fully or partially reconstructed, or if the company shall be closed/declared bankrupt.
A voluntary advisor can be assigned to assist a bankrupt entrepreneur with economic and personal advice following a declaration of bankruptcy.

Factors for success

The experience with the Early Warning programme in Denmark is extremely positive. Two impact evaluation studies comparing participants in the Early Warning programme with a control group show that Early Warning companies that survive are capable of maintaining or increasing their turnover, employment and export. Moreover, the Early Warning companies that are declared bankrupt do so with less debt to the public sector such as unpaid income tax and VAT than the corresponding control group. Both evaluations find that the economic benefits of the Early Warning programme outweigh its economic costs (social considerations are not a part of the evaluation studies).

The key success factor for the Early Warning programme is the group of voluntary advisors that bring with them the experience and skills needed to turn around companies going through a moment of difficulty. Furthermore, there is a strong focus in the Early Warning organisation on facilitating exchange of experiences and the joint development and testing of methodologies to assist in the best possible way the viable and non-viable companies in the programme.

Obstacles and responses

One of the main challenges facing the Early Warning programme is that company owners facing difficulties often resolve to come only when the problems have become almost unmanageable. As a result, many of the companies that could have been saved end up being closed down. Early Warning is currently exploring different approaches to getting in contract with companies at an early stage when their crisis is still relatively manageable. These efforts are expected to increase the future success rate of the Early Warning programme in Denmark.

Further information:

Projectmanager Svend Røge, sr@vhmidtjylland.dk