By Adonis Adoni | Photo by TASPHO | Gold Magazine | Nov 2023

Nicolas Agathocleous, Partner, Board Member and Head of Advisory Services at RSM Cyprus, discusses how management consulting can help steer companies through tumultuous times, as well as facilitating the integration of cutting-edge technologies, including the transformative tools of Generative AI.

G: Where is the bulk of RSM Cyprus’ management consulting work typically found and which industries/sectors have been particularly active in seeking your services in recent years?

N.A.: Management consulting services span various industries and sectors, with demand for specific offerings such as debt restructuring, feasibility and financing studies, business valuations, and operational performance reviews subject to shifts influenced by economic conditions, market dynamics and regulatory changes. The client landscape is not static; it evolves over time. In response to these changes, our approach is centred on adaptability. We aim to understand and respond to the evolving requirements of our clients and the broader market, harnessing the power of being understood. In recent years, notable demand for our services has emanated from industries like financial services, healthcare and technology, as well as the vibrant hospitality and tourism sectors. This adaptability and our commitment to comprehending our clients’ unique needs empower us to remain relevant and effective in the ever-changing landscape of management consulting.

G: As economic uncertainty increases, businesses are encountering operational challenges and financial distress. How can company boards make effective use of advisors like RSM Cyprus to tackle these turbulent times and emerge stronger?

N.A.: It becomes imperative to adopt a meticulously structured approach. This entails conducting a thorough evaluation of the company’s financial wellbeing and any operational hurdles. It involves scrutinising cash flow and debt obligations and identifying areas of vulnerability within the business. The objective is to formulate a well-defined strategy that effectively addresses financial distress and operational challenges. Other crucial considerations include identifying areas where efficiency can be improved without compromising the company’s long-term viability. The management of debt is another critical aspect of this approach, and market alignment is equally important. Furthermore, managing the workforce effectively and maintaining high morale during these challenging times is essential. Lastly, there is the need to revaluate the existing business model. This involves examining its viability and considering potential diversification or pivots in market and product strategies to ensure long-term success and resilience in the face of adversity.

G: Faced with pandemic-era labour concessions and record inflation, companies are pressured as regards real wages and rising costs. What kind of strategies should businesses be implementing in this challenging environment?

N.A.: Businesses need to be agile, proactive and strategic in their approach, so as to adapt to changing market conditions while maintaining financial sustainability and resilience. Each company’s situation is unique, so a tailored strategy that aligns with those specific challenges and opportunities is essential. For example, a cost management and efficiency strategy can improve operational efficiency, revaluate supply chains to mitigate disruptions, minimise costs and enable investment in technology and automation to increase productivity. In terms of the labour force, flexible work arrangements, such as remote work or compressed workweeks, can help companies adapt to changing labour dynamics, retain key talent and cross-train employees to be versatile. Additionally, adjusting pricing strategies to reflect increased costs and inflation while remaining competitive can be beneficial, adding value to products or services and exploring new markets or customer segments to diversify revenue streams. Also, supplier negotiations can reduce reliance on a single supplier and negotiate contracts to secure favourable terms and build solid, long-term relationships with key suppliers to leverage negotiating power. Another strategy, in the context of financial management, is to closely monitor cash flow and ensure that there is sufficient liquidity for unexpected challenges, or to explore debt refinancing or restructuring options to manage financial obligations. Tax planning would help engage with tax advisors to ensure compliance, identify potential savings and optimise the company’s financial position. Finally, sustainability and environmental initiatives can lead to long-term cost savings and resonate with environmentally conscious consumers.

G: Generative AI has emerged as a transformative technology with the potential to bring substantial change in various business sectors. What key considerations should companies bear in mind when contemplating the adoption of such tools to drive operational improvements?

N.A.:The successful adoption of AI requires a thoughtful and strategic approach, in order to maximise benefits while minimising risks and challenges. Considerations include data quality and quantity, as generative AI models require large volumes of high-quality data, to which an organisation needs to have access so as to train and support these models effectively. Moreover, data used for generative AI must be collected, stored and processed in compliance with relevant laws. Building and maintaining generative AI models will require a skilled team of data scientists, machine learning engineers, domain experts and the appropriate infrastructure of hardware and cloud-based solutions. Companies must also consider implementing robust cybersecurity measures to protect against potential threats. Understanding the costs and benefits associated with implementation and the expected ROI is essential and it must be aligned with business objectives to address specific operational needs. On top of that, effective change management processes must be in place to ensure that employees are prepared for the introduction of generative AI. In addition, companies should be informed about evolving regulations and standards in the AI field, especially in industries with specific compliance requirements.

G: The higher-cost borrowing environment, coupled with a decline in market liquidity, is likely to fuel an increase in bankruptcies. What solutions and strategies are available for companies facing financial distress?

N.A.: In an environment characterised by higher-cost borrowing and reduced market liquidity, companies facing financial distress must consider a range of solutions and strategies to navigate these challenges and avoid bankruptcy; however, actions must be taken without delay. Some options to explore may include debt restructuring, where companies negotiate with creditors to restructure existing debt obligations, such as extending maturities, lowering interest rates, or even accepting partial debt forgiveness. Companies can also seek new financing arrangements with more favourable terms to replace existing high-cost debt, which can reduce interest expenses and improve liquidity. Another strategy is equity infusion: raising additional capital from existing shareholders or new investors through equity infusions, which can bolster the company’s financial position. Companies can also identify non-core or underperforming assets that can be sold to generate cash and improve liquidity or consider selling owned assets (like real estate or equipment) and then leasing them back, providing an injection of cash while retaining the use of essential assets. Furthermore, they can secure financing based on the value of the company’s assets, such as accounts receivable or inventory, which can be a valuable source of liquidity, using products like factoring. The potential may also exist to explore mergers or acquisitions that can provide access to additional resources and synergies to improve financial stability. If restructuring outside bankruptcy proves unfeasible, bankruptcy may offer a structured process for financial reorganisation and protection from creditors.