Top 5 Considerations When Hiring a CRO
Choosing the right Chief Restructuring Officer candidate can determine the trajectory of a successful reorganization.
To date, restructuring activity has been mild in 2018. With that said, uncertainties around changing global trade policies and financial markets continue to exist. Anticipated interest rate increases will likely further pressure companies. As concerns mount, trouble for companies will follow, which may lead to companies to be in a position they never wanted, such as needing to hire a Chief Restructuring Officer (CRO). In this article, we will outline what a company should look for in CRO candidates and how to define their role.
What ATTRIBUTES SHOULD a Company Look For in a CRO?
In short, the skills required of a CRO are broad, encompassing not just financial know-how, but also an operational and strategic mindset. Some of the most key attributes a company should consider when evaluating candidates include:
- 1. Industry Experience: Adds credibility to the CRO inside the company and shortens his/her learning curve
2. Strong Leadership: Provides objectivity to the restructuring process
- 3. Restructuring Experience: Critical to understand the nuances of a restructuring process, and provide insights on key work streams such as liquidity management or bankruptcy preparation
- 4. Effective Communicator: The board, lenders and perhaps other constituencies will require regular communication – providing a clear message on timelines, objectives and results will build their confidence in the process
- 5. Collaboration: The CRO will need to have the ability to work alongside the current management team and may need to rely heavily on finance and accounting staff
What Are the Roles and Responsibilities of the CRO?
The roles and responsibilities of a CRO may vary from one situation to another. The role may also evolve during the duration of the assignment. In essence, the role can be whatever it needs to be.
However, the role of the CRO must be understood by company leaders. Although CROs are often hired to focus on the turnaround plan, there is often a blurred line among other financial, operational and executive matters. Clearly defining the scope of work in the engagement letter is critical. It is important to define who the CRO reports to at the company, which is generally the board of directors, but, in some instances, can also be another corporate officer.
A summary of the roles and responsibilities of a CRO may include:
- Evaluation of the company’s current financial health
- Analysis of drivers or causes of financial distress
- Management of cash and liquidity and, if required, assist with the negotiation of additional financing
- Negotiate with lenders, trade creditors, shareholders and other constituents
- Establish a restructuring plan inclusive of clear objectives and milestones
- Conduct management meetings and coordinate with other legal and financial advisors involved with the process
- Present restructuring results to the board, management, shareholders and lenders
Lastly, it is important to note that a CRO role is not limited to the context of a bankruptcy filing or upon the requirement of a lender following a covenant default. On the contrary, it may be advisable to hire a CRO early in the process, which will allow for more time to assess issues, effectuate change and drive value. In these situations, the CRO may be labeled something else, such as Chief Transformation Officer or Chief Strategy Officer, if the word “restructuring” elicits fear among the organization, current management or stakeholders.
How Dacarba Can Help
Dacarba LLC is a leading consulting firm that provides an array of services for companies and their stakeholders at all levels of the capital structure and across a broad range of industries. Dacarba’s restructuring practice has advised on over 60 mandates with liabilities totaling more than $75 billion during 2016 and 2017. Numerous professionals at the firm have served as a CRO, including cases Endeavour International, Gawker Media LLC, GMX Resources, Texas Pellets Inc. and Knight Oil and Tools, among others.