How Boards Can Spot Early-Warning Signs Of Distress

When everything seems to be going well—the economy is robust and the stock market is rising—it’s hard to imagine hard times ahead. Yet, if boards fail to look for early-warning signs of distress, they may not identify potential risks before it’s too late.

In this episode, Catherine Bromilow, Partner with PwC’s Governance Insights Center, joins host TK Kerstetter to discuss how boards can recognize when their company is on the precipice of a potentially negative operating spiral.

“We don’t have to look back too far in history,” said Kerstetter, “to see signs where industries have been on fire and people have missed warning signals.”

Bromilow defines two types of red flags today’s boards should be looking for. The first is often easy for anyone to spot (e.g., declining stock price, investigations, significant restatements), while the second is far easier to dismiss in times of prosperity. Even then, industry or company performance doesn’t always mirror the wider economy.

As we sit here and tape this [episode], the economy is roaring ahead, the stock market is still doing well, but one of the things we know is, even when there is a really strong economy, there are always industries—either because they are countercyclical to the economy or because they are experiencing their own kinds of stresses and challenges—that are going to have a hard time and struggle.

— Catherine Bromilow, Partner, PwC’s Governance Insights Center
The original episode can be viewed here.