Governance in Distress

Abstract

Most companies experience periods of financial distress, reflecting external environmental challenges such as new competition, changes in product technology, problems with labour supply or increasing capital costs—all of which have the potential to put pressure on the company’s overall financial and economic viability. Companies can adjust to such problems in a variety of different ways including entry into new markets, new product development or diversification into new areas of business. Each of these business development options is likely to create a demand for more finance, at least in the short term, to successfully implement the business plan, putting pressure on cash flow in circumstances where resources may already be constrained.