With less crisis around, demand for chief restructuring officers stablises

28 September 2017 Consultancy.uk

The number of industry experts predicting Chief Restructuring Officers gaining relevance has fallen for the first time in three years. While companies are increasingly focusing on the implementation of business transformations, largely due to relatively stable economic conditions, those expecting the CRO’s relevance to remain low have increased from 10% to 23% since last year.

The importance of chief restructuring officers (CROs) has grown in recent years, as companies across a range of sectors, from energy to retail, have found the environment shift rapidly under their feet. Plummeting commodity prices, the value of oil, and digitalisation have fed into this, among other major issues. Other sectors are not immune to changes either, with cross-boarder competition as well as increasingly rapid technological change enabling new competitors and business models to compete across a range of industries and global locations.

A new report by Roland Berger into the chief restructuring officer role, titled ‘Focus: the quiet transformation', sees the consultancy consider how the landscape for the CRO has changed over the past twelve months, and how that has impacted demand for the restructuring experts. The research involved 135 restructuring experts globally.

Relevance today and tomorrow of CROs

Despite the huge levels of change on the local and international markets then, a decline was noted from 65.4% of respondents last year suggesting that CRO functions would become more relevant, to 58.3% of respondents expecting relevance to increase this year. Meanwhile, those expecting relevance to remain static has jumped more than 10% sice last year to 23.3%.

The change in expected relevance stems from increased stability in a variety of sectors, as low commodity prices become the new normal and transformation programmes have been started across a range of business types.

Key focal points

In terms of the key role of CROs, meeting the needs of corporate finance remains their dominant remit, as cited by 82% of respondents. Organisation/management functions take the number two spot, as cited by 66% of respondents, while personnel cost management follows at 42% of expert respondents surveyed. The survey also noted that, given the relative stable economic conditions, even in light of potential disruptions, CROs are increasingly seen as moderators of change and transformation.

When CROs are engaged, the researchers found that implementation remains the main touch point for engagement, up from 30.9% last year to 40% of respondents this year. Engagement in the process of preparing a rescue plan fell slight, from 29.1% last year to 28.3% this year. The number of respondents indicating preventative engagement increased by 5 percentage points on 2016, to 13.3%.

Role of the CRO in the company

In terms of the kinds of roles seen as important for the CRO in the most recent year, implementation has risen again, following a decline last year. 68.3% of respondents view them as important, up from 56.8% last year. This year they are also viewed more as moderators, up from 37.3% last year, to 45% this year. Control meanwhile, continues to decline in view as a key part of the role of CROs, falling from 24.5% in 2015 to 18.3% this year.

The role of CROs in transformation programmes is increasingly focused on implementation and mediation of people across the company as a whole. As such, a variety of different skills come into play, which may involve the engagement of multiple stakeholders, both external and internal to the organisatio. Mitigating negative PR from a cost cutting operation, for instance, while supporting internal changes in the face of difficult choices affecting staff, may cause staff to strike to save their jobs from cuts.

Key soft-skills

Soft-skills are deemed important to CROs in the current business environment – possessing implementation strengths and creating a sense of urgency without sending clear signals of a crisis are characteristics that top the list. In addition, creating transparency about the need for transformation and creating trust, are also highly cited, especially with the addition of an established focus. Mobilising or motivating change management and employees is relatively low in the ranking of key skills, however.

Key soft-skills

All in all, despite the state of flux in the business world due to a variety of factors, the relatively stable economy means the CRO role looks unlikely to grow in stature for now. The authors of the report conclude, “The emphasis is shifting, but the fundamental logic remains the same: Without a crisis, there is no pressure for change – and the transformation will hardly succeed. If corporate performance programs in a company gain in significance, the job profile for the CRO must reflect this.”

Earlier this year consulting rival AlixPartners released its annual study on the key developments in the restructuring market, finding that demand for the service is expected to rise, particularly in the US and UK.

Related: Business model disruption lifting demand for restructuring services (Roland Berger's 2016 CRO study).

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