Managing Your Risks In A Crisis – 1 Personal

As a director or owner manager of a business facing difficulties, it is important to ensure that you manage your personal risks appropriately and these articles address how to approach this task by focusing on four key areas.

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1 Your normal responsibilities

During a crisis, you need to remember that as a director of a business you will continue to have all your normal responsibilities in respect of the company under all the normal legislation that applies to it, from health and safety and environmental legislation, through any industry or sector specific requirements such as licensing, through to the basics such as keeping accounts and tax records (and for directors, your statutory responsibilities under the Company’s Act for filing accounts and completing an annual return).

2 Abnormal risks in your normal responsibilities

When a business gets into difficulty however, some of the normal business responsibilities and risks can become particularly acute.

One particular area to be aware of for example is employment law and its requirements for consultation, as in turning your business around you will undoubtedly need to make changes that relate to people, from how they do things and who does what, under which terms, through to who is still working for you at the end of the process. But employment law provides employees with significant ranges of rights concerning what changes can be made and what processes need to be followed, which can be enforced through employment tribunals potentially at significant cost to your business. This is not an issue that arises specifically because the business is in difficulty, as these are risks that any business runs when looking to change employee arrangements, but they are an area where firms in distress become exceptionally vulnerable due to the need to push through changes.

3 Exceptional levels of personal pressure

There are many basic fears that many of us share in varying degrees and the stress of dealing with a business in difficulty can bring these to the fore:

If I fear:	In a crisis, I can feel:
Failure	I’ve failed because the business is in this mess
Rejection	My customers aren’t buying or are ungrateful because they don’t value me and my products any more
Instability and uncertainty	I am worrying all the time whether we are going to make it through or not
Conflict	I am having to fight the bank and say no to creditors all the time

The fact is that, unless you absolutely thrive on seemingly impossible challenges (the blacker the better), having your business get into difficulty is going to be a stressful, depressing, and difficult experience that is going to put a strain on you, your family, and your employees.

So you need to recognise these as valid appropriate reactions and emotions. After all, if you did not get upset about the fact that your business is in difficulty, what would that say about you and your commitment to it?

But in doing so you must also:

prevent these feelings from overwhelming you and preventing you from taking action; and
preserve your own mental health.

You are the most important resource when it comes to restoring your business to health. If you don’t do it, no one else will do it for you. The surest way to guarantee that your business will fail is for you to give up trying to save it because it is ‘all too difficult’, ‘there is nothing you can do’, or ‘you just can’t cope.’

If you are feeling depressed or stressed, and the symptoms of excessive stress can manifest themselves as a form of depression, you should see your doctor to get professional help to get you through this period.

4 Insolvency specific risks

Finally, there are also specific ‘insolvency’ related risks to you as a director which can lead to potential personal liability and/or listing on the directors’ disqualification register and these will be discussed in more detail in Part 2 of these articles, while Part 3 will cover the risk that you can be held personally liable for your company’s arrears of PAYE.

Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any action.