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The KPMG Restructuring practice has supported banks and other major lending institutions in monitoring, assessing and responding to financial decline, stress and distress amongst their borrowing customer base for decades.

The independent business review (below) for lenders and other financial stakeholders is a core part of our service offering and we take pride in rescuing and recovering complex situations, either on an individual basis or across a portfolio, with our Non-Performing Loans (NPL) advisory solutions.

The same analytical skillset is also deployed frequently in assessing the financial covenant and standing of 3rd parties in other situations such as for Pension Trustees when assessing sponsoring employer organisations (also set out below).

Another way this skillset has brought value to clients is in the Corporate community where on an increasingly frequent basis, we are engaged to help strong and stable companies manage supply chain (failure) risk, customer credit (recovery) risk, or assess the financial standing of contractual counter-parties, joint venture partners and other alliances.

In the current COVID-19 environment an increase in corporate failures is widely anticipated and the KPMG Restructuring team is actively engaged in supporting many of our corporate clients in identifying and responding to that risk.

More details on our Risk Management Solutions for companies, lenders, investors and other financial stakeholders is set out below.


Third party risk management (for companies)

With increasingly complex supply chains, regulatory pressures, greater reliance on suppliers and consumer demands for greater transparency and traceability, businesses are beginning to recognise the need to develop a strong grip on Supplier Risk Management. There has been a proliferation of stories around major data loss, operational disruption leading to consumer product shortage, and supplier failure leading to brand damage. In such an environment, effective Supplier Risk Management (SRM) through robust procedures is more important than ever.

The COVID-19 outbreak has served to heighten the existing complex risk profile of the supply chain, but it has also raised the potential for financial failure in other parts of the value chain.

Customer credit risk management has always been a core part of the traditional finance function but when the entire portfolio risk rises, the challenges involved in identifying and responding to specific exposures increases exponentially.   

What we do

We combine a holistic assessment of potential risks, from strategy and controls to regulation, financial crime and through to remediation.

These risks are often interrelated and so we assess situations in totality rather than isolating specific issues. 

Our approach also seeks to: 

  • Identify the level of information required.
  • Prioritise critical risk areas. 
  • Strike the balance between proactive and reactive solutions to mitigate risks.
Graphic showing the holistic assessment of potential risks

Why KPMG

  • Wide skillset: Our team is drawn from a broad range of capabilities across Restructuring, Supply Chain, Operations, Forensic, Cyber and others, to provide the most comprehensive assessment of supplier risk. We have specialists who understand the issues our clients are facing.
  • Local expertise: Our breadth of capability across a global member firm network means we can respond ‘on the ground’ quickly to help intervene and mitigate any risks which arise. We combine subject matter expertise with a global reach and local knowledge in a compelling way.
  • Experience: We have over 10 years’ experience advising major corporates on proactive management of supplier risk. Our approach is commercial, pragmatic, insightful and innovative.
  • End-to-end support: We have experience of designing, implementing and running SRM processes as well as dealing with issues as they arise. Our range of digital solutions includes cognitive computing research, dynamic workflow management systems and detailed financial analytic tools.

Third party business disruption support (for companies)

Market disruption is a constant presence, yet most businesses are not fully prepared for the consequences of a value chain partner becoming insolvent.  Initial adversity often masks the opportunity for strategic growth. With appropriate professional insolvency and restructuring advice, you may be able to unlock possibilities for transformational change.

What we do

KPMG’s specialist insolvency and restructuring know-how could add significant value, minimising initial loss exposures and maximising any potential medium and longer term opportunity. 

Scenario Short term / tactical issues Longer term / strategic potential
Critical supplier failure
  • Alternative options for replacing supply
  • Approach to WIP and unfulfilled orders sitting in supplier premises
  • Managing recovery action from Insolvency Practitioner appointed
  • ‘Clean’ business and/or assets acquisition from appointed supplier Insolvency Practitioner
  • Potential to secure services of key personnel
  • Secure improved commercial terms from new backer if supplier ‘restarts’
  • Pass incremental business to alternative existing supplier on improved terms
Key customer failure
  • Loss minimisation as an unsecured creditor
  • Asset recovery under Retention of Titles claims
  • Credit insurance options
  • Short term liquidity / funding impact
  • Navigating through the obligations placed on suppliers under the new Corporate Governance & Insolvency Act 2020 regarding continuity of supply to companies subject to insolvency proceedings (the so-called “ipso facto” regime).
  • Engage directly with your (failed) customer's customer
  • Acquire elements of customer's business & assets — do what they did, but better & cheaper (remove the ‘middile-man’)
Competitor failure
  • Speed of response in contacting customers of failed competitor
  • Identifying customers and contracts of value held by failed competitor
  • ‘Clean’ business and/or assets acquisition from supplier Insolvency Practitioner
  • Debtor book acquisition and/or recovery service arrangement

 

Why KPMG

We are insolvency specialists
  • As an established insolvency practice, our dedicated team is familiar both with Insolvency case law and the appropriate commercial tactics to follow during insolvency proceedings. 
  • We are able to take a robust approach with stakeholders to minimize losses and maximize opportunities.


Flexible approach 

  • Whilst our approach is proven, we are aware that the individual circumstances surrounding each situation is different.
  • Our team works closely with management to understand company-specific factors (e.g. risk appetite, funding availability, strategic vision) to provide options that support broader objectives.


Practical implementation support

  • Our team is proud to provide practical support to our clients at every stage in the process. For example, our rapid Short Term Cash Forecasting (STCF) tool can provide an invaluable insight, raising early visibility of any issues and allowing for mediating action to be taken. 

 


Independent business review for financial stakeholders (lenders / investors)

If you are a lender or an investor to a business that has seen its financial results deteriorate, your own financial risk exposure could start to increase.  Understanding the factors driving underperformance can sometimes be challenging, particularly where you do not have direct access to the company’s real time financial data and/or have representation on the Board.  Even where you do have access to financial data and perhaps regular dialogue with the company management team, it can still be very difficult to determine whether such factors are likely to continue in the short to medium term.

What we do

The implications for your position as a stakeholder to the business could be wide ranging and you will want clarity over such things as:

  • Your ability to recover sums already lent or invested in different scenarios (including failure);
  • Any incremental exposure to your current position that the business may have planned forward, e.g. assumptions around drawing from unused facilities;
  • Management intentions regarding any ‘new money’ funding requirement (above existing facilities); and
  • The company’s ability to service its ongoing obligations to you

Our preferred approach at KPMG is to act as a trusted advisor and honest broker between parties in making a robust and independent assessment of the current position and outlook under a range of credible scenarios, before making recommendations that aim to address concerns on all sides.

Why KPMG

At KPMG Restructuring we we have been involved in supporting financial stakeholders make this sort of assessment for decades. We are trusted by all of the main UK clearing banks and a variety of other lenders and financial investors.


Non-performing loan (NPL) advisory solutions

We have a proven track record of working with banks, borrowers, regulators, NPL portfolio investors and NPL portfolio funders, in capacity as principal and advisor. Find out more about our non-performing loans solutions here.


Pensions advisory (for trustees)

The Pensions Advisory practice offers independent advice to pension scheme trustees. We deal with a diverse range of stakeholders, including Employers, Shareholders, the Pensions Regulator, the Pension Protection Fund, providers of finance, and all of the main employer covenant advisors. We advise scheme trustees across the full range of situations from regular triennial covenant reviews and ongoing monitoring through to assisting negotiations and implementing complex transitions and restructurings. Find out more about the work we do here.

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