By Ian Schofield, Industry Advisor, Restructuring and Insolvency, Encompass Corporation     

The insolvency market is compact and currently reducing in size. Driven by low interest rates and the fact that banks are less inclined to liquidate businesses, preferring where possible to retain customers and support business growth, there are fewer insolvency cases.

Indeed, total company insolvencies recently hit their lowest level since the end of 2007. According to the Insolvency Service, a total of 4,052 companies were declared insolvent in the three months to March 2015, down 1.3% on the final quarter of 2014 and 11.3% lower than the same period last year.

In light of this shrinking market, the industry has become more competitive and therefore needs to be more aggressive in attempting to win new business. Getting to the heart of the business issue more quickly and successfully and being able rapidly play back a grasp of the full picture, will ultimately enable insolvency practices to win new business ahead of the competition. And this has become an even more urgent concern in light of pending legislation likely to soon impact on the sector.

In a move designed to end the uncertainty of unlimited hourly rates and make costs more transparent, the Government is poised to introduce new rules requiring insolvency practitioners to provide upfront estimates of the cost of working on cases at the beginning of October 2015.

All this means that, going forward, insolvency practitioners will first of all need to give an estimate of what they think the time costs are going to be when they take a case on and subsequently if they go beyond those time costs, having to go back to creditors, explain why the time costs have been exceeded and get further approval for increasing their fees.

Taken together, the new fee rules and increasingly competitive environment leads to growing pressure on insolvency practices to extract, consolidate and understand information relevant to a given case, as early in the matter as possible. Typically, the content is available. The issues are accessing multiple sources of information and quickly coming to an understanding on which to make sound commercial decisions. . More often than not, the ever-growing sources of digitised information to which insolvency practices have access become a barrier to, rather than an enabler of decision-making capabilities and rapid turnaround of new pitches.

Broken Processes

Often today, the process involves a great deal of manual work, searching and reviewing multiple sources of information to work out who owns what, and whether anything can be recovered.

It’s inefficient and can often involve many un-billable hours scouring the web and trawling through pages of reports. Manually piecing together company structures, directors, shareholders, asset valuations and court actions to understand how they all fit together is time consuming, difficult to estimate, and stops case managers and other staff from getting on with higher value work in the firm.

Unrecoverable hours in pre-appointment and fixed fee work erode profits, and slow decisions impact response times, compromising business development success.  In many firms, these processes remain from a time when information was not available digitally and have been left unexamined while a host of other administrative activities have been automated or ‘gone online’ around them.  And although company and asset search is not part of their daily workload, Partners in restructuring and insolvency are now taking note of this blockage that is impacting their bottom line.

Finding a Way Forward

So how can insolvency practices address these pain points and effectively resolve these issues? The challenge lies in the fact they need to make reliable decisions and meet deadlines, but it can be difficult to be sure all the relevant information has been canvassed? It’s not always possible to search everything at the outset, yet missing just one critical detail at the beginning of a case can lead to nasty surprises, lost assets, costly delays or reputational damage down the line.

That’s where visualising insolvency information comes into play, enabling practitioners to see relevant information at a glance and save significant time when investigating a company’s financial position.

The ability to use the latest visual information management technology enables practitioners to more easily and accurately foresee the complexities of a job from the very beginning and, as a result, make better decisions around which jobs to take on and how to allocate resources to ensure profitability.  Using the approach enables investigators to clearly spot links that would otherwise be difficult to see in an information haystack, uncovering potential risks, as well as opportunities.

Visual information management technology can deliver a range of commercial advantages. When the big picture of a company’s corporate tree is instantly available, it also helps practitioners uncover other business opportunities or find assets that may not have otherwise been realised, or could help to restructure a potentially insolvent company. The bottom line is a technological solution that converts commercial information into an actionable visual format plays a critical role in making the right decisions from the very beginning of a job and preventing re-work further down the line.

Positive Prospects

These are challenging times for the UK insolvency sector. With the market of available cases continuing to contract and the new capped fees regulations expected to come into play this autumn, the time is right for insolvency practitioners to, review existing business process and respond to the change.  One way to achieve this is to take advantage of technology as we have seen our clients and peers in other industries already do (indeed as many people across the industry have already done in their personal lives with the use of iPhones and tablets).

The advent of high-quality visual information management technology is therefore leading to a step-change in the industry.  The ability to visualise data from a range of sources   all in one place is allowing practices to search and pinpoint relevant information quickly and efficiently and minimise human error, providing the basis for delivering better insolvency outcomes, a sustainable competitive edge and a commercial advantage.