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Causes of Crisis Situations

Turnaround Strategies
The Turnaround Management Society is engaged in a research project to find out what leads to corporate crisis.

The Turnaround Management Society (TMS) asked 405 turnaround managers and restructuring experts about what factors, in their experience, lead to corporate crises. The last survey on this subject was carried out in 1990. The 2014 TMS survey highlights the internal and external causes that corporate restructuring specialists have witnessed in their assignments over the last five years. The results are then compared to previous surveys in order to identify changes over the last 40 years in the reasons for company failure.

Most corporate crises are only recognized once they become obvious in reduced sales figures or the continuous loss of money. There are internal and external reasons for corporate crisis; the internal causes, however, are often not sudden, but build up until they reach a point where they can no longer be ignored. This point often occurs when a company runs out of cash, does not pay its bills on time, and reduces communication with its stakeholders.
Crises that have external causes are often more sudden and, if the management did not prepare sufficiently, the company may be plunged into a sudden crisis. If the management is not experienced in dealing with this kind of crisis and the company does not have sufficient resources the company might end up in insolvency before the management has a chance to react properly. External reasons are often cited as the cause of difficult situations, but most of the time the reasons are internal.