Crisis diagnosis in anti-crisis management process in a company

Abstract

The relevance of the crisis situation diagnosis is confirmed by the diagnosis decisions designed and applied in the business practice, audit reports, bank assessment methods and company‘s own concernment. The aim of the research is to define crisis development stages and possible preventive means and to design the crisis diagnosis system in the anti-crisis management process in a company. The paper deals with four stages of crisis development: prodromal crisis (CP), acute crisis (CA), and chronic crisis (CC). Crisis resolution (CR) is the final goal of any crisis management. When a crisis is overcome, its performance stabilizes and a company starts to grow. Therefore, the main point in company’s management process is to notice the barrier when company’s performance starts going down, in order to foresee the result which can cause crisis situation in a company.

Systems of Company’s Financial Crisis Diagnostics

“…Tomēr vispārināti finanšu krīzi uzņēmumā var skaidrot kā nelīdzsvarotu uzņēmuma finanšu darbību un paša uzņēmuma vadības ierobežotas iespējas ietekmēt finanšu rakstura attiecības, kas norisinās uzņēmumā. Praksē, kā to atzīst vairāki zinātnisko rakstu un grāmatu autori (Демчук, Ефремова, 2009;Балдин, Быстров, 2005;Журба, 2009;Бланк, 2006;Sakalas and Virbickaite, 2011), uzņēmuma maksātnespējas varbūtība vai arī uzņēmuma ilglaicīga darbošanās nerentablajā saimniekošanas jomā un potenciāla, kas nepieciešams rentablai attīstībai, neesamība tiek identificēta kā finanšu krīze.…”

“…Pārsvarā secinājumi tiek veikti uz finanšu pārskatu datu analīzes pamata, kas īstenojama pēc standarta algoritmiem. Tāpēc analīzes procesā galvenokārt tiek lietotas tās standarta metodes (Garškaite-Milvydiene, 2014; Kopitov and Dubko, 2009;Sakalas and Virbickaite, 2011;Асаул et al, 2007;Бланк, 2006).…”

The Role and Importance of Company Crisis Diagnosis in Anti-Crisis Management

“…Some researchers (Sakalas & Virbickaite, 2011) point that the earlier the indications of a crisis are revealed, the more adequate anti-crisis (avoidance) measures can be taken and the greater opportunities to incur smaller losses are available for companies. For example, in the prodromal crisis phase, which some researchers (Mitroff et al, 1996;Fink, 2002;Paraskev, 2006; Meište & Jakštiene, 2015) note as the first stage of crisis development, the probability of emergence of problems as well as of bankruptcy is very low because at this stage fluctuations in the performance of the company not always indicate a crisis (Meište & Jakštiene, 2015), and by discovering crisis signals particularly in the prodromal crisis phase, the company can avoid significant losses, as in this case the company has an opportunity to identify the causes of a potential crisis, to design a plan of adequate anti-crisis activities and to avoid the crisis through effectively implementing the plan. Otherwise, "if the right moment is missed and situation is not assessed properly, a crisis can strike a company and its performance and management cannot avoid big losses" (Meište & Jakštiene, 2015).…”

“…For example, in the prodromal crisis phase, which some researchers (Mitroff et al, 1996;Fink, 2002;Paraskev, 2006; Meište & Jakštiene, 2015) note as the first stage of crisis development, the probability of emergence of problems as well as of bankruptcy is very low because at this stage fluctuations in the performance of the company not always indicate a crisis (Meište & Jakštiene, 2015), and by discovering crisis signals particularly in the prodromal crisis phase, the company can avoid significant losses, as in this case the company has an opportunity to identify the causes of a potential crisis, to design a plan of adequate anti-crisis activities and to avoid the crisis through effectively implementing the plan. Otherwise, "if the right moment is missed and situation is not assessed properly, a crisis can strike a company and its performance and management cannot avoid big losses" (Meište & Jakštiene, 2015). At the next acute crisis stage it is impossible to recover all the loss (Darling & Kash, 1998), and with the crisis becoming stronger, the company's losses increase, whereas its opportunities to stabilise the situation and regain the pre-crisis situation decline.…”

Diagnostic of Company's Financial Crisis as an Insolvency Prevention Measure

“…In this context, the necessity of early detection of the symptoms, forecasting of crisis situations, and assessment of probability of the crisis becomes crucial, indicating the main tasks of the crisis diagnostics. Though a number of researchers and economists in their studies (Sakalas and Virbickaite, 2011;Garskaite-Milvydiene, 2014;Meiste and Jakstiene, 2015;Darling and Kash, 1998;Blank, 2006;Asaul et al, 2007;Korotkov, 2010) reiterate the benefits of systematic implementation of efficient crisis diagnostics for the needs of the company's management, still the crisis diagnostics and prediction issues as well as anti-crisis management issues remain barely studied in the economic and management science both in Latvia and abroad.…”