Financial restructuring:
This type of restructuring is focused upon restructuring of the financial department of the business. It is usually preferred when a business entity would like to increase the incoming profits of the company, or you are overburdened by debts.
Mostly, the dropping sales due to a crumbling economic situation are responsible for this kind of restructuring. Assets and liabilities are what are restructured in the process by the hired corporate restructuring firm.
This varies between changing the tax profile of a niche, strategies to reduce borrowing and growing the working capital, or reshuffling the equity, i.e., redistribution of shares or resources between major stakeholders in the business. This type of restructuring is being carried out in a pandemic since, while the outputs are decreasing, the inputs are increasing, and so is the debit of the niches.
Organizational Restructuring:
Organizational Restructuring is concerned with bringing about reforms in the operational system of the company by altering the configuration of an association. It involves activities such as redefining the hierarchies, carrying out layoffs to get rid of extra employees, and so on. This is to bring down the inputs of the corporate and reduce further losses.
Given the current situation where companies are losing employees due to the disease, redefining hierarchies, and roles of employees is of paramount importance. Additionally, the lockdown has reduced business and therefore, the need for a large workforce.
Hence, a strategic layoff helps the companies to reduce the money they spend on salaries. However, the impact on the livelihood of the fired employees is a major drawback. Nonetheless, this cannot be avoided since the organization itself would go in loss otherwise
One of the key changes in the organizational restructuring by reduction of manpower is automation and introduction of IT and IT enabled processes. Today with remote access, pool of talent from IT hubs in Bangalore or Hyderabad can be sourced by a consultant in any other city be it a Corporate Restructuring firm in Delhi or anywhere else in India.
Additionally, each company has to go through restructuring at some point in time out of compulsion under the pressure to meet the market standards, demands, or norms. It always advised restructuring before it becomes a compulsion to save yourself from unnecessary loss.
As the businesses are bleeding in the fragile economy in India, the need of the hour is for inhouse finance team to relook at the debt restructuring with the banks or with assistance of a Corporate Restructuring CA firm in India or an independent restructuring consultant, before it is too late to turn around.