Process of firm’s downfall – ‘Special talent vital’

“Some people confuse with bad luck”, American cartoonist Kin Hubbard (1868 -1930).

What can a new executive do to rescue a company failing because of certain crisis that led to the resignation of its administrative board together with the executives, especially when the company appears to be in a free fall and cannot be rescued between demanding creditors, with a blinking vision hovering around?

It takes the grace of Almighty God and special talent and skill to rescue a stumbling company toward.

Not any executive is capable of successfully dealing with a free falling company and delayed liabilities such as internal debts, salaries, rent dues and several contracts unable to be fulfilled, coupled with aging or faulty tools, temporary contracts, labor force and other aspects a company that projected ideal image of a successful company.

Here, I am talking about a true story that took place in the last decade of the last century regarding a medium company affiliated to a group of major companies that operated in various fields, such as investments, real estate and retail.

The company in question projected the image of a successful firm with its main business focus on retail market and trademarks, and used to possess several real estate assets, locally and outside the country, in addition to activities that yielded annual excellent returns to the point where it was considered a strong wing of major companies.

The huge mistake the executives of this company made was to focus, almost entirely on investment sector at the time when the stock market was booming. The majority of its cash flow was in the investment sector which, in a very short period, managed to generate 80 percent returns and prompted the company to ignore other sectors.

The company reached the level of selling some of its assets at a loss, which means the entire company solely operated as a stock market company.

The management went on to commit its deadly mistake after it failed to conduct proper risk assessment of its investments by signing several loan agreements with several banks, while in reality, it did not need such loans — as they were based on the assumption of getting several corporate and commercial estates.

The company could not stand the major financial crisis, as it was caught off guard completely. It incurred losses of about 131 percent as a result (according to report issued by legal audit office).

The company at that time started paying its loans in installments, but due to the rising interest rates on the debt, its financial center started to give in. subsequently, no one could control its free fall, as if the entire domain was ravaged by cancer to the point where it became almost impossible to rescue it.

Its board of administration submitted their resignation to the executive council of the major group. What happened next will be continued in the next article.

Twitter@alzmi1969

By Yousef Awadh Al-Azmi

 

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