Early warning pillars

Early warning relies on the following three pillars:

  • A number of experienced Early Warning consultants doing the initial  screening and diagnosis which results in the main points of an action plan and defines the next step(s) in the rescue operation
  • A number of experienced business people who voluntarily support and advise the company owner in order to change the situation into survival and possibly new growth
  • Optionally, a close cooperation with a number of very experienced insolvency lawyers when legal measures are foreseen to be necessary or at least to be considered.

A successful Early Warning mechanism is dependent of efficiency and a very competent chain of the above-mentioned. If one of the chain's joints fail, the assistance process will fail. It should be mentioned that the most important contribution from each of the above-mentioned is different. It can be put very short:

  • The consultant should ensure that the right track is determined. It means that it is of crucial importance that the right actions are taken and in the correct order. If this is not done there is usually no second option – the company goes bankrupt
  • The volunteers should have the right insight and knowledge to be able to give advice to the company owner solving his/her challenges. The consultant makes sure that the right topics are addressed – the volunteer that the right topics are dealt with in a competent and correct way
  • If involved, the insolvency lawyer’s most important task is to make sure that the right way of solving the matter is chosen and no golden possibilities overlooked.

A typical course
Initial contact and screening:
When a company in distress contacts Early Warning his/her initial contact will be with an Early Warning consultant. The consultant will, usually by phone, establish a first overview of the situation, including an assessment of whether or not the company meets the conditions necessary to receive support.

Next step is a meeting with the company owner. During the meeting the consultant will, in dialogue with the company owner, assess the situation and agree on the main points of an action plan and next step(s).

Next step will in principle be one of the following:

  • Either connection with a volunteer with the right skills. The volunteer will support and advise the company owner for a longer period of time - usually until the company is safe again (often 5 to 15 months)
  • Or the consultant will arrange a meeting with a lawyer. At this meeting the potential legal actions will be determined and an action plan discussed and agreed. This may include reconstruction, bankruptcy or seeking solutions out of court.

The above mentioned course is the typical one (or theoretical one). A lot of variation occurs, but it is essential to pay attention to the different roles and tasks.

As an example of good practice, a more detailed description of the Danish Early Warning process can be found here.