Lack of Risk Management at Insolvency Consulting Companies: An Empirical Study in Germany 2024

In the wake of the COVID-19 pandemic, the Russian war of aggression against Ukraine and the resurgence of the Middle East conflict, government measures to support the economy have intervened massively in economic activity and thus influenced the real insolvency situation. This situation creates disruptive conditions in insolvency counselling and requires comprehensive risk management for the strategic safeguarding of internal processes in insolvency counselling companies. Despite a number of academic articles that address a lack of risk awareness in insolvency counselling, there have been no valid statistical surveys on this topic to date. The topic has also been largely ignored in practice. This article presents a study that examines risk management in insolvency advisory companies in the context of government intervention in the global economy from 2020 to 2023. The aim of the research is to assess the necessity and existence of risk management in these companies. A survey of 350 insolvency advisors was conducted between March and April 2024, from which 113 complete data sets could be analysed. The central hypothesis of the research study is that a significant majority of insolvency advisory companies have insufficient risk awareness and do not implement comprehensive risk management strategies. The survey results confirm that risk management is rarely practised and that a well-founded risk awareness is lacking in most consulting companies. It is noteworthy that two-thirds of those surveyed consider the benefits of risk management to be low, although more than half of those surveyed recognise increased risks due to government crisis measures. Ultimately, this study concludes with a recommendation that a standardised EU insolvency regulation could offer the greatest benefits for the insolvency sector, as it would simplify risk management for consultants in all member states.