NAIROBI, Kenya, May 20 – Effective governance and financial control provide an apt opportunity for businesses to identify distress, the latest Deloitte Restructuring Survey has revealed.
The survey themed ‘Early Identification of Distress’ stresses that timely identification allows businesses to take necessary actions to protect or salvage their operations.
It asserts that amidst Kenya’s ongoing currency challenges, fiscal pressures, and consumer distress, financial lenders are best positioned to detect early signs of business distress.
This role is increasingly critical in the context of the weakening Kenyan shilling, which has depreciated significantly against the US dollar due to US monetary tightening and geopolitical fears driving investors towards US bonds.
Deloitte’s East Africa Financial Advisory Leader, Gladys Mukami, said the late identification of financial distress as a cardinal drawback in businesses.
“Operational restructuring, advisor-led, and management-led informal restructuring are anticipated to dominate the landscape in 2024. However, the main obstacle to successful informal restructuring remains the late identification of distress,” she said.
Makumi highlighted that early detection of distress could significantly improve outcomes under administration, a process often misused as quasi-liquidation.
She noted that early identification also facilitates out-of-court, informal restructuring, which the survey found yields the highest returns to creditors.
She emphasized that the responsibility for early distress identification lies with both company directors and lenders.
She advocated for the development of skilled and qualified directors capable of recognizing early warning signs and taking timely corrective action.
For lenders, she stressed the importance of diligently monitoring portfolios and proactively intervening before warning indicators become critical.
