Step 4 to Financial Recovery: Initial Diagnosis

We have been talking about the Process to Financial Recovery (as per the Government Finance Officers Association) in our series of the same name so far and we have talked about recognizing, mobilizing, and coming up with generic treatments.  Today we are up to Step 4: the Initial Diagnosis.

Now some will ask: why are we diagnosing after mobilizing and after having come up with generic treatments?  Because you need to know first that you have exhausted those options before you go diving deeper.  Sometimes generic treatments will help and having mobilized your core team and gotten them into carrying out those generic treatments will do the trick.  Other times that won’t work and having dispensed generic treatments helps you to know what your company’s problem is not.  If those treatments didn’t work, then it’s because the problem goes deeper and a few variables have been ruled out already.

So on to the initial diagnosis: this part of the process is designed to identify the root cause of financial distress as this will allow for the recovery leaders to select the most appropriate (fiscal) technique(s) to assist. The initial diagnosis will look to focus on the immediate source of the distress. The recovery leadership (that’s you) will want to continue to identify the problem areas that have significant recovery leverage.  These problem areas are the ones that:

•    Can be solved or lessened through a reasonable investment
•    Offer a significant return on that investment
•    Will provide a return soon enough to help stabilize the situation quickly

The recovery leadership can choose and generally should choose to involve others to procure additional perspectives – in other words, two heads are better than one, three are better than two, etc. Since the recovery leadership is not necessarily always “On the Floor”, employees can often assist in bringing in a fresh point of view. Why? Because since they work on the cogs of the company wheel every day, they know what could benefit from some tweaking, oiling, maybe adding in a new component or even where removing dead weight would cause the greatest benefit.  Not only that, but it brings everyone to the ‘thinking table’ and gets everyone involved in turning the company around and solving the problem(s).  This can be a boon to company morale and team sentiment even amidst the dark of storm.

That said,  developing a well thought-out model will greatly assist in the diagnosis process in order to provide a full overview of the situation and how to get going on fixing it.  Next up: Fiscal first aid.

That said, always make sure you make an informed decision in all situations,

The Capital Corp Team

Advertisement