Planning to protect viability in macro-economic in stability contexts

The external shocks that have characterized the last years - covid, war in Ukraine and consequent increase of prices and business risks - involve the growing of the importance of planning tools to preserve the viability of the enterprises. External shocks, in fact, make forecasts even more necessary to map and understand what are the right choices to keep the company in equity, economic and financial balance. Paradoxically, however, the risk of error linked to the greater myopia of management reduces the time horizon on which reliable reasoning can be developed. In this context, corporate crises become more likely and almost structural at the global economic level precisely because external shocks impact in a way or another horizontally on every single business. In this paper the authors want to stress the importance of planning and the possibility of doing so even in macro-economic in-stability context

Corporate Governance in Downturn Times: Detection and Alert \u2013 The New Italian Insolvency and Crisis Code

In its life cycle, an enterprise may experience periods of crisis. If the crisis is monitored promptly and appropriate measures are taken, not only may the enterprise continue to operate but it may also be able to seize opportunities for growth. The Italian legislator is introducing a procedure aimed at supporting companies to detect the very irst warning signs of a crisis. The supervisory board of auditors, the audit irm, and certain qualiied creditors will have the right and duty to start the early warning procedure (\u201callerta\u201d). The board of statutory auditors (Collegio Sindacale) plays a fundamental role: its ex-ante supervisory and control activities over management allow it to efectively play an important role as main recipient of any crisis warning signs. The new regulatory framework lays down certain indicators and critical thresholds, which may trigger the alert process. Initially, the Delegated Legislation (Bill No.3671-bis) sets forth certain speciic inancial indicators. The new bill (Crisis and Insolvency Code) on the contrary refers to a more complex and sector-speciic system of indicators. The indings of an empirical research conducted by analysing a sample of more than 600 enterprises and testing the discriminating capacity of the indicators initially considered are presented herein

Corporate Governance in Downturn Times: Detection and Alert – The New Italian Insolvency and Crisis Code

In its life cycle, an enterprise may experience periods of crisis. If the crisis is monitored promptly and appropriate measures are taken, not only may the enterprise continue to operate but it may also be able to seize opportunities for growth. The Italian legislator is introducing a procedure aimed at supporting companies to detect the very first warning signs of a crisis. The supervisory board of auditors, the audit firm, and certain qualified creditors will have the right and duty to start the early warning procedure (“allerta”). The board of statutory auditors (Collegio Sindacale) plays a fundamental role: its ex-ante supervisory and control activities over management allow it to effectively play an important role as main recipient of any crisis warning signs. The new regulatory framework lays down certain indicators and critical thresholds, which may trigger the alert process. Initially, the Delegated Legislation (Bill No.3671-bis) sets forth certain specific financial indicators. The new bill (Crisis and Insolvency Code) on the contrary refers to a more complex and sector-specific system of indicators. The findings of an empirical research conducted by analysing a sample of more than 600 enterprises and testing the discriminating capacity of the indicators initially considered are presented herein

Corporate Governance and ERM for SMEs Viability in Italy

Family Small and Medium-sized Enterprises (Family SMEs) in Italy have been asked by the new Insolvency and Crisis Code (IC-Code) to establish organizational, management and accounting bodies and tools appropriate to their nature and size. They need to be able to face early warning of company’s crisis and potential loss of going concern and to be able to implement strategies provided by the law to recover viability. The peculiarity of the Italian System is the joint existence of two levels of controls. A “downstream” one carried out by Auditors in charge of the accounting control and an “upstream” one carried out by the Supervisory Board in charge for the surveillance of directors’ behaviour. The board of statutory auditors (Collegio Sindacale), which has been defined as the watchdog distinguishing Italian corporate governance system, plays a fundamental role in reaching the goal. Its supervisory activities are played ex-ante over directors and are set with independence and competence. Auditors, instead, operate when everything has already been decided or even implemented concentrating on the accounting issues. The IC-Code sets up new corporate governance rules for a huge number of Family SMEs requiring the appointment of independent control bodies, Board of Statutory Auditors and Auditors and demanding therefore for more attention to risk monitoring and managing

NFI for Early-warning CSR Directive anda insolvency directive: their composed impact on smes. Searching for a new model.

Companies’ crisis and insolvency forecasting using financial data has been studied for decades. The idea that Non-Financial Performance Indicators ("NFPI") can play an important role in a forecasting crisis and insolvency model is gaining ground. Avoiding crisis and insolvency requires close and continuous control over assets able to be liquidated, but often in the effort to keep financial balance, companies risk to sacrifice their ability to generate income. The use of the NFPI could contribute in managing this important critical issue, facilitating not only financial survival in the short term, but also economic recovery in the medium to long term. Starting from the document issued by OIBR that promotes the use and communication of NFPI for SMEs, the paper aims, with a qualitative approach, to select a basket of NFPI to be added to those already provided for by the new Insolvency Code (D.Lgs 14/2019) and elaborated by the Italian National Council of Chartered Accountants to find out if the company is in a loss of viability situation or not. The paper focuses on the following research questions: Can NFPI be used as instruments to better forecast crisis and insolvency risks? Is there a model that SMEs can implement

ESG for SMEs: Can the Proposal 2021/0104 for a European Directive Help in the Early Detection of a Crisis?

With the proposal for a European Directive 2021/0104, the number of entities who will be required to prepare a non-financial statement (NFS) has been broadened. The directive provides that small and medium-sized enterprises (SMEs) may also voluntarily opt for drawing up a non-financial statement. It is therefore important to identify reporting standards containing key performance indicators (KPIs), tailored to the characteristics and structure of SMEs. In addition to the potential advantages in terms of improvement in relationships with stakeholders, NFI could be relevant for an early diagnosis of crisis signals therefore, an early warning behavior. This paper, therefore, aims to analyze how non-financial information can be a valuable aid to all governance players in identifying those first signs of crisis. In Italy, Organismo Italiano Business Reporting (OIBR) is drafting a document that promotes the use and communication of non-financial information on the part of SMEs with the dual objective of demonstrating that corporate governance structure on the one hand, and management and accounting tools on the other should be adequately designed and functioning so as to prevent a company’s exposure to the risk of failing to operate as a going concern

Corporate Governance and ERM for SMEs Viability in Italy

Family Small and Medium-sized Enterprises (Family SMEs) in Italy have been asked by the new Insolvency and Crisis Code (IC-Code) to establish organizational, management and accounting bodies and tools appropriate to their nature and size. They need to be able to face early warning of company’s crisis and potential loss of going concern and to be able to implement strategies provided by the law to recover viability. The peculiarity of the Italian System is the joint existence of two levels of controls. A “downstream” one carried out by Auditors in charge of the accounting control and an “upstream” one carried out by the Supervisory Board in charge for the surveillance of directors’ behaviour. The board of statutory auditors (Collegio Sindacale), which has been defined as the watchdog distinguishing Italian corporate governance system, plays a fundamental role in reaching the goal. Its supervisory activities are played ex-ante over directors and are set with independence and competence. Auditors, instead, operate when everything has already been decided or even implemented concentrating on the accounting issues. The IC-Code sets up new corporate governance rules for a huge number of Family SMEs requiring the appointment of independent control bodies, Board of Statutory Auditors and Auditors and demanding therefore for more attention to risk monitoring and managing