Andrew Knight and Henriette Rothschild recently caught up with Tracey Holmes from the ABC to discuss the challenges facing the sports industry and the misperceptions around the role voluntary administrations can play in turning things around.
KordaMentha Partners Andrew Knight and Henriette Rothschild recently caught up with Tracey Holmes on ABC's The Ticket podcast, to discuss the challenges facing the sports industry and the misperceptions around the role voluntary administrations can play in turning things around.
Acknowledging the current challenges for sports bodies, Andrew Knight said "Clearly there are unprecedented financial impacts associated with COVID-19 at the moment and I think this has forced many companies into survival mode and sports bodies are not immune to this challenge."
"And like many other organisations, some will require external expert assistance to navigate the options that are available.
"For many sports bodies, their traditional sources of revenue including membership fees, ticket fees, media and sponsorships have evaporated with the hard stop of sport"
In discussing the role of voluntary administrations, Henriette Rothschild said "Having discussions with a number of board members in Australian sporting organisations, I think there is a misperception around voluntary administration and very often it's looked at in the same way that people would look at insolvency or actual liquidation"
"There is a misperception the voluntary administration is a last-resort. It should be done with a view that you're doing it because you want to save the organisation and you want to see it prosper.
"By doing it early enough, Directors are really fulfilling their duty because they are ensuring that they take steps that are needed to attempt to turn the business around while there's an opportunity to do that."
"Right now, you have the air cover of COVID-19, but many sporting organisations have been running an unsustainable model. So the losses experienced aren't just related to COVID-19, but rather broken models or unsustainable cost structures. What has happened in the last while is these have become more exposed."
"Taking action now can actually help manage the reputational risk rather than continuing on with an unsustainable model."
Delving further into the challenges facing Directors, Henriette said "It doesn't take more than a drop of 10% or 15% of revenue to expose that and in many cases, what we've seen in the last while, is drops in excess of 50%. So I think it's incumbent on Directors to fulfil their duties to have a very close look at whether they really believe that they can have a very clear plan that gets your organisation to not just to survive but actually to thrive".
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