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How do you develop and execute a contingency plan in case of a restructuring failure or setback?

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Restructuring is a complex and risky process that can have significant impacts on the performance, culture, and reputation of an organization. Sometimes, despite careful planning and execution, restructuring can fail or encounter unexpected setbacks that threaten the viability of the change initiative. In such situations, having a contingency plan can help you mitigate the negative consequences and recover from the crisis. A contingency plan is a set of alternative actions or strategies that you can implement in case your original restructuring plan does not work out as intended or faces major obstacles. In this article, you will learn how to develop and execute a contingency plan in case of a restructuring failure or setback.

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JOSEPH BONN

Owner at E/RE Corporation

1 Identify the risks

The first step in developing a contingency plan is to identify the potential risks that could derail your restructuring plan or cause it to fail. These risks could be internal, such as resistance from employees, stakeholders, or unions, or external, such as market changes, regulatory issues, or legal challenges. You can use tools such as SWOT analysis, PEST analysis, or scenario planning to assess the likelihood and impact of each risk and prioritize them accordingly. You should also monitor the progress and performance of your restructuring plan regularly and update your risk assessment as new information or feedback emerges.

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2 Develop alternative solutions

The next step is to develop alternative solutions or strategies for each of the identified risks. These solutions should be realistic, feasible, and aligned with your restructuring goals and vision. You should also consider the costs, benefits, and trade-offs of each solution and how they would affect your stakeholders, resources, and timeline. You can use techniques such as brainstorming, problem-solving, or decision-making matrices to generate and evaluate different options. You should also consult with your team, experts, or advisors to get their input and support.

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3 Prepare a contingency plan

The third step is to prepare a contingency plan that outlines the details of each alternative solution and how and when you would implement it. This plan should include the trigger or indicator that signals the need to activate the plan, roles and responsibilities of those involved, steps and actions required, resources and tools needed, communication and reporting channels, and criteria and metrics to measure effectiveness. The contingency plan should be documented clearly and concisely, shared with your team and key stakeholders, and reviewed and revised periodically to ensure its relevance and readiness.

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4 Execute the contingency plan

The final step is to execute the contingency plan when the need arises. You should act swiftly and decisively to activate the contingency plan and communicate it to your stakeholders. You should also monitor and evaluate the implementation and results of the contingency plan and make adjustments as necessary. You should also document and learn from the experience and use it to improve your future restructuring plans and processes.

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Carl Seidman, CSP, CPA

Helping finance professionals master FP&A, Excel, data, and CFO advisory services through learning experiences, masterminds, training + community | Adjunct Professor in Data Analytics | Microsoft MVP
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Restructuring is rarely nice and neat. Sometimes it can be done cleanly if there’s enough planning in advance for a swift reorg. But it’s in everyone’s best interest to try to arrive at a reasonable outcome so the restructuring doesn’t drag on. Ironically, restructuring can get very expensive.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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JOSEPH BONN

Owner at E/RE Corporation
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The contingency plan can be operational, eg sales, inventory, operations, asset based, ie some plants, product lines, or businesses don’t cut it, or structural, meaning the capital structure of the firm If it’s the latter, some options include, contingent calls for equity infusion, debt going PIK, debt to equity conversion, or debt forgiveness. Lots of dilution, tax, and priority or share in the pain issues

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How do you develop and execute a contingency plan in case of a restructuring failure or setback?

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1 Identify the risks

2 Develop alternative solutions

3 Prepare a contingency plan

4 Execute the contingency plan

5 Here’s what else to consider

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