After working within the strict professional constraints of Insolvency Practice for many years, Ladislav Hornan describes how attitudes toward members of his profession - and the expectations put upon them – are undergoing a profound change. He is Managing Partner at the London office of national accountancy group UHY Hacker Young.

A generation ago, received wisdom on the subject of business and personal insolvency was that American entrepreneurs wore their failures like campaign medals, won for heroic (if unsuccessful) endeavours in the fierce heat of the commercial battle. Their British counterparts, meanwhile, tended to treat business failure as a great stigma resulting from such possible misdeeds as misadministration, incompetence or unfounded over-enthusiasm.

Broadly speaking, the law in the respective jurisdictions reflected the business community's attitude. In the USA, it continues to favour those with the irrepressible 'pick yourself up, dust yourself down, start all over again' attitude.

In Britain, it favours the unfortunate creditors. Often strict timescales are set during which those with varying degrees of slapped wrists are expected to hang their heads in shame before daring to venture up the slippery business pole again, if at all.

The law in Britain was more to do with the historical desire of land and property owners to get their pound of flesh (or as much of it as possible) than the encouragement of bold enterprise or stimulation of a flexible, expanding, burgeoning economy.

Changing times

In the past decade or two, I think it safe to say that the insolvency profession in the UK has undergone something of a transformation, which is a direct response to changing attitudes.

That said, in recent years the big four firms have tended to distance themselves from Insolvency Practice by isolating and downsizing their departments.

Because the 'mid-sized' firms could be said to have more of a vested interest in maintaining a relationship with recovered or recovering businesses, it has fallen to this 'second tier' firms to make the running in this sector of the profession. This more accommodating stance is reaping rewards now that the emphasis has shifted from 'pathology' to 'preventive medicine'.

It used to be our job to use our professional skill and judgement to clear up embarrassing business and personal financial messes, with the occasional boost of rescuing a business as a going concern. Generally, the idea was to optimise the speed and minimise the pain for everyone concerned.

Now most firm's stock in trade is 'turnaround and recovery', although some enlightened firms have practiced this approach for a long time. There's a huge difference.

In a nutshell, turnaround and recovery amounts to taking a more constructive and imaginative look at how failed or failing businesses can be sold, salvaged, restructured, divided, down-sized or otherwise reorganised to fit changing circumstances.

'Save the good bits, sell the assets if necessary but stay on your feet and save jobs,' has become the dictum. Winding-up the organisation has become the last resort, as opposed to the first port of call.

Somewhat belatedly in my view, the law was recently changed again to reflect the attitude of those it ostensibly serves. The 'head-hanging' periods have been substantially reduced and there is a more constructive and ameliorative tone to the proceedings.

Whereas the Insolvency Practitioner was once seen as the public funeral director who sanitised and organised the tidy burial of dead businesses and bankrupt souls, he or she has increasingly come to be seen as someone to whom you might turn for advice about bringing a critically ill enterprise back to health.

In the past, almost without exception, through pride or prejudice, it was the custodians of sick businesses who were most reluctant to seek advice.

Fashionable?

To the astonishment of some of the more conservative members of the insolvency profession, we are now increasingly regarded in some quarters as part of a glamorous, creative, even fashionable calling, in which some of those with the brightest business brains and deftest touches in the business community undertake the delicate art of 'managing change.'

The Human Resources director used to be the figure allotted the unenviable task of implementing this metamorphosis but as the net has widened from 'making a few changes here and there' to wholesale re-positioning of entire businesses, the hunt is on for people with the skills and experience to undertake this challenging mission.

'Managing change' has become a critical new discipline that embraces a range of skills across the whole spectrum of modern management. In fact, even in favourable conditions, those with responsibility for revitalising businesses are now likely to require an understanding of internet communications, marketing, electronic technology, global market forces, human resources management, outsourcing, diversity, law and international currency fluctuations.

Who better to undertake this task than the professionals who've earned their stripes effecting such changes in the most inclement business climate imaginable - insolvency?

Managing change

If Insolvency Practitioners can turn around and rescue businesses that have gone so far down the track that they are on the verge of ceasing to be viable, the argument runs, what might they be able achieve with slightly overweight or complacent organisations which are otherwise in rude good health?

The answer is, a great deal.

If company directors who see threats on the horizon have the courage to instruct an experienced turnaround and recovery practitioner to examine their options while the company is still profitable and viable, they may be able to tap into a fertile 'crisis' mindset before the crisis actually materialises.

The objective must not be to simply build financial barricades to shelter the shareholders from the perceived approaching storm but to make a critical analysis of strengths and weaknesses, opportunities and threats that the business will encounter. It should then be possible to come up with a hypothetical 'turnaround and recovery' plan that hopefully takes the business out of the path of the approaching storm altogether.

A practitioner who has been doing just that, with a gun at his temple, for years should have no difficulty in reading the signs and suggesting where the business might find a climate that will be more favourable.

Drawing on long experience, he or she might have even have a few fresh thoughts about the best way to get there.