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Etelka KATITS: How does the self-developed FINel financial expert system help the work of turnaround management consultants?

In advisory work examines how firms at different stages of the corporate crisis face financial distress, and how the choices of financial restructuring strategies adopted in response are influenced by the corporate lifecycle.

An analysis of the real causes of a crisis or serious problems in a company’s operations, which should not be confused with the symptoms or consequences of a crisis, is extremely important, as it can be used to identify the areas whose effects need to be limited or eliminated. The analysis of the real cause s for the preparation of a recovery plan of a company is as important as the preparation of the measures to achieve the desired changes. To resolve a crisis, its real causes need to be eliminated or minimised, while working on the wrong causes is just a further waste of time, money and effort, which only makes the crisis situation worse.

The reasons for a crisis need to be distinguished from its symptoms (Katits, 2010, 2017ab, 2019), which signal the beginning of a crisis but are not the cause of its development (Lymbersky, 2014).

The symptoms of a crisis are even more difficult to determine, when there is an economic boom, as the general increase in demand masks many weaknesses of a company. However, in a recession the situation is reversed – all issues that had been previously unnoticed or had been swept under the carpet come out into the open.

If the company applies the right management technique, ie implements the chosen measures correctly/successfully, it can (re) enter a growth path. This assumes that the turnaround management strategies chosen and implemented by the company were appropriate for the identified causes or problems. So the causes of the crisis are influencing the company’s choice of possible turnaround management strategies. If we look at the financial difficulties and problems a company faces, we can also consider whether their strategies affect the likelihood of a successful turnaround and recovery. It is believed that the right restructuring technique will lead to a recovery of businesses and / or will not reach the stage of a mature crisis. In contrast, the increase in debt.

Empirical research on corporate turnaround management is based on the criteria by which we can measure the success of corporate turnaround management according to the operational phase, aspects and problems of the company’s activities. Consequently, the research framework goes well beyond the “operational” and “strategic” dimensions that are commonly used to classify turnaround activities.

From the quantitative methodological repository, we recommend the FINel financial expert system adapted to the life stages, including the crisis, the basic and 7 additional modules of which are already underway, but further developments are awaiting and being tested. The core module, which follows a systematically structured logic and can be used in the process of financial planning, analysis and control: “Make our business profitable while having solvent, non-indebted, its operation is perspective and efficient asset management.” The modules presented in Figure-1 can be use together and separately.

Figure-1. Content of the FINel finance diagnostic and value creation expert system

Source: Katits, 2019, 2021ab

The information obtained from the turnaround controlling table helps to develop and implement a turnaround management plan. How? – The so-called with causal therapy, which we prove by examining a filtered Hungarian corporate sample between 2007 and 2020. In turnaround management as a process, decision points and stages can be distinguished, namely: turnaround situation, survival,  recovery-stabilization and putting the company on a growth trajectory. In Figure-2. the same colors represent the affiliation of stage-cause (problem)-turnaround management methods (content). Turnaround management begins when we recognize the turnaround situation, but most of all the stage of the latent crisis, from the vague and ambiguous weak signals that carry specific information content. The solution to the problems identified in the cause research was to properly select and implement the various restructuring programs. So we found evidence that the latent crisis and the choice of turnaround management techniques and strategies are related to healing.

      

Figure-2. Causal therapy on a Hungarian company sample

As sustainability is a driver of growth and value, it can be an acceptable and reasonable goal even at the time of growth. How? – We will share in the next professional news.

Bibliography:

KATITS, E. (2010): A vállalati válság pénzügyi menedzselése (teória és praxis). Budapest: Saldo Kiadó, 507 p. ISBN: 9789636383466.

KATITS, E. (2017a): A vállalati (életciklus) pénzügyek – Fogalomtár és alapvető módszertan. Sopron: Soproni Egyetem Kiadó, 348 p. ISBN: 9789633342534.

KATITS, E. (2017b): Haladó vállalati (életciklus) pénzügyek – Pénzügyek változ(tat)ások idején. Sopron: Soproni Egyetem Kiadó, 486 p. ISBN: 978963334306.

KATITS, E. (2019): A jelzés- és okkutatás válságban, avagy a pénzügyi turnaround controlling alkalmazása. CONTROLLER INFO, 7(4), pp. 23-28. 10.24387/CI.2019.4.4

KATITS, E. (2021a): Az életciklus-, a turnaround- és a fenntartható vállalati pénzügyek elhatárolása és összekapcsolása – eredmények és kihívások. In: Kovács Tamás, Szóka Károly (szerk.) XV. Soproni Pénzügyi Napok „Fenntartható gazdaság – fenntartható pénzügyek” pénzügyi, adózási és számviteli szakmai és tudományos konferencia: Konferenciakötet, 349 p. Konferencia helye, ideje: Sopron, magyaroroszág, 2021. 09.29.-10.01. SOPRONI FELSŐOKTATÁSÉRT ALAPÍTVÁNY, Sopron, 2021, pp. 178-200. ISBN: 9786158023078

https://drive.google.com/drive/folders/1k1jag1cObg2Mo-YXkWkEa20TOLNxxCPO?usp=sharing

KATITS, E. (2021b): Fordulatkezelés a győr-moson-sopron megyei KKV mintában, avagy a turnaround pénzügyek aktualitása. In: Farkas Szilveszter (szerk.) Vállalkozások, kockázatok. Összegyűjtött dolgozatok, PMS 2000 Mérnöki Társaság, 158 p.

LYMBERSKY, C. (2014): The International Turnaround Management Standard. Version 1.5. Hamburg: Turnaround Management Society.

 

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