In among the endless stream of bad news coming out over the last few days and weeks, we started to think of how it is likely to affect the insolvency profession. You must all have heard someone saying “It is alright for you, you must be very busy?” as if it is an original thought. However, we see both risks and opportunities in the current market and we thought we would share some with you, just in case you had not already got them covered.
Risks
At the risk of stating the blindingly obvious, those around you at work may present the biggest danger. Many of your own staff and partners may have overextended their credit over the past few years and you should ensure that you have systems in place to enable them to approach you and deal with any problems they may have. You are responsible for the fitness and propriety of your staff and you have to have systems in place to ensure that they self-certify their fitness each year and are aware of the need to inform you if they enter an IVA, are made bankrupt, etc.
For those of you who work in multi-disciplinary practices, especially the lawyers who appear particularly exposed at present, consider what steps you may need to take to protect your insolvency practice. The reason that lawyers are first on the list is that many multi-disciplinary practices rely heavily on conveyancing fees for cashflow and you’d have to have been living in a cave in Siberia for the last year to have avoided hearing about the dramatic fall in house transactions. Having said that, those of you who are allied with accounting practices face similar risks as more of the practice’s small and medium sized businesses look for savings or find themselves unable to keep going. Make sure that you protect your licence by keeping a close eye on practice finances.
Watch for tell-tale signs such as increased pressure on billing WIP, especially where you are being encouraged to take short cuts over fee authority to get money in. Another indicator is where you notice delayed payments in key statutory areas such as bond premiums where there are insufficient estate funds and you have to settle them from office funds before subsequently recharging the estate.
Tidy up your closures and review your cases to ensure that they are as clean as possible. It is inevitable that some practices with insolvency departments will fail, there have been at least two in the last 6 months, and while you may be able to keep the appointments and trade on if you were not culpable, there is also a worrying tendency for certain firms to try and buy the WIP and transfer appointments to them with a view to attacking the former office holder.
Watch your referral sources for signs of weakness. If you rely on a small number of contacts for the majority of your cases, have a contingency plan in case they succumb to the financial pressures we are all facing.
Ironically, don’t get too busy. Remember that you have to have the resources and skills to be able to take on an appointment. Failure to take this into account could result in licence removal and could have wider implications for the profession. It may be tempting to take on another bank administration, but if you only have someone on work experience free to settle a few billion pounds worth of complex futures transactions, it might be better to pass!
Don’t ignore compliance. As explained above, we will work around you if necessary, but don’t put off compliance any longer. Unless you identify and address your problems you are only going to compound them as you get busier and the regulatory penalties for systemic issues can be particularly onerous.
Opportunities
It is not all doom and gloom. There is certainly more business about, albeit that a lot seems to be less lucrative ‘burials’. There are several opportunities and these may already have crossed your radar, but we thought we’d look at a few.
If you have been considering a break from a multi-disciplinary practice, now may be a good time to do it. Insolvency practices are usually cash-rich and you may be able to organise a buy out quickly and relatively cheaply if you are dealing with a general practice that has cash flow issues to deal with.
You may have noticed that the banks have their own problems at the moment. This could well result in a reduction in their commitment to bank panels, allowing smaller firms to keep more lucrative appointments in-house. In addition, the larger firms may be busy with some pretty complex issues elsewhere and may not protect some of their traditional sources so much.
Several recent articles have highlighted the rise in asset backed lending and there are certainly opportunities for IPs to foster relationships with factors and asset leasing companies who are outside the traditional bank panel relationships and may be prepared to see the benefits of local or specialised appointments.
Certain areas of the economy appear more likely to struggle than others and we think that it is almost essential for anyone in practice to attend R3’s latest series of retail breakfast briefings (http://www.r3.org.uk/coursesandevents/default.asp?i=3&pag=courselist&type=courses) to brush up on some key skills prior to taking advantage of what appears likely to be a bloodbath in January.
With marketing likely to be easier over the coming months, now is a great time to build compliance into your systems. By having your systems reviewed and putting improvements in now, you will be able to improve your margins just as your case numbers start to rise, leaving you better placed to manage risk on cases and make the most of what is likely to be a very exciting couple of years.
