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Lankan
companies not prepared for another tsunami-like crisis "Just like Sri Lanka being provided debt relief by many countries, affected small enterprises also need similar support," noted Nivard Ajith Cabraal, President, Business Recovery and Insolvency Practitioners Association of Sri Lanka and a former president of the Institute of Chartered Accountants of Sri Lanka, during a presentation to The Sunday Times Business Club (TBC) in Colombo. Speaking on "Crisis Management - Are Sri Lankan companies prepared after the Tsunami", Cabraal said that a business completely washed off should have "The Recovery Treatment" -- writing off its earlier loans and this outright grant could be procured from a grant made to banks. He said even three months after the tsunami Sri Lankan companies are still not prepared for a crisis like this. Cabraal comments on Monday evening relating to how to handle a crisis ironically came just before Sri Lanka went through a second tsunami alert at midnight on the same day. Asked to comment on the controversy over the 100-200 metres buffer zone, he said it was impractical as circular, tall vertical buildings could survive the onslaught of the tsunami as seen last December where many tourists were saved by moving to upper floors in hotels - and it's difficult to say how far tidal waves would go inland. Circular structures was another reason why various religious statues withstood the tsunami. "The nature of crises could be unexpected but businesses should be prepared to face crises. There are crisis controls that have to be followed carefully. In Sri Lanka the practice of circulars deal sometimes with crisis management. But the unfortunate situation has been that the people take a long time to understand the contents in circulars and issues like legal terms etc. There are special institutions in the US that help the people understand circulars and complicated government advertisements through a simple explanation process." He said to understand crises and prepare for it there should be mock trials just like war games. Before a war starts -- in expectation -- soldiers would acquaint themselves by playing war games to understand the intricacies of war. He said that if the armed forces were not acquainted with war, they would run away without facing it. "It is extremely important to learn how to handle crises and be ready. Only a very few people in Sri Lanka took the earthquake insurance cover though the premium was small while most took cover for floods. Those who took this cover were adequately prepared for a (virtually unbelievable) crisis." Cabraal said, "most of the Sri Lankan companies were not ready to face the crisis resulting from the Tsunami and worse still, did not ever seem ready now to face any crisis". He said 4,389 industries were directly suffered due to Tsunami according to an IDB survey; 1.5 percent of employees and employers died and one percent employers were disabled; cost of damage to business sector was estimated at Rs 1,400 million while damaged industries have obtained credit facilities amounting to Rs 501 million. Cabraal said the tsunami has taught us that, "if we do not have planned responses to meet uncertainties, we would be helpless in any crisis. The remedy is to be prepared (like those who took tsunami cover insurance)." The monthly meeting was hosted by Trans Asia Hotel and the co-sponsored by Lion Breweries Ltd. Venture
Capital Funds to rebuild hotels The Cabraal Consulting Group (CCG),which he heads, is preparing an information document - on behalf of the hotel industry - to promote investment among worldwide investors and VC Funds. Cabraal said the CCG is optimistic that suitable VC funds would respond favourably within a month. Initial data shows that Rs 3 billion or US$ 30 million is required to rebuild the affected hotels of which Rs 2 billion would be sought from Venture Capital Funds. Some 23 hotels in Beruwala, Hikkaduwa, Galle, Wadduwa and Trincomalee have to be rebuilt of which about 10 hotels have been extensively damaged. He said funding difficulties would be encountered by SMEs including hotels, leading to a deadly debt trap and the long-term impact on tourism would be political turmoil, unemployment and unrest increasing unless re-building commences immediately. Many affected hotels would find it difficult to service old loans as well as the new loans and it would be necessary to obtain equity or quasi-equity funds to rebuild and existing loans have to be restructured in a meaningful way. He said that the proposed vehicle to source equity/quasi equity funds would be to establish a Private Venture Capital Fund to provide the funds to rebuild damaged hotels and to create an environment for them to be on a sound and stable financial position for long-term sustainability after the disaster. |
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