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What makes a great insolvency practitioner?

Author: ICAEW Insights

Published: 10 Aug 2022

An insolvency practitioner’s work is varied, challenging and innately human. It requires impeccable technical acumen, excellent people skills and a flair for spotting connections to be at the top of the game.

As Chair of the Joint Insolvency Examination Board, and former Chair of the Board of the Insolvency Service, Steve Allinson has some clear thoughts on which blend of skills will prepare someone to be an effective practitioner in this field.

“On a technical level,” he says, “knowledge of insolvency law is essential. This is an ever-changing, fast-paced arena. New case law is emerging all the time, and so is new legislation. At the height of the pandemic, for example, new laws designed to protect the economy directly affected how our sector operates.”

It is equally crucial to understand other types of law, too. “In any insolvency, you will face elements of employment, contract, property, regulatory and banking law. Being able to categorise those matters, yet see connections between them, is a challenge – and a real asset for an insolvency practitioner (IP).”

While numeracy plays a significant role, Allinson points out: “You don’t necessarily have to be an accountant to be an IP. Understanding accounts and balance sheets is certainly an important advantage – but I think there’s a much wider skillset here.”

Holistic marks

Allinson explains: “Insolvency is a multidisciplinary brief – and one of the most vital, value-added qualities for any great IP is to have a mind for business. In any set of assignments, you may have, say, a retail company, a construction company and a design company. Each will have a very different business model. So, an ability to see what each model was trying to achieve, and where or how it’s gone astray in that undertaking, is instrumental – and of immense help to your clients.”

In recent years, Allinson notes, the Joint Board has developed ‘holistic marks’ for IP exams, to promote interdisciplinary and practical thinking. “It’s not a case of ‘You’ve understood black-letter law – okay, tick; you’ve understood balance sheets – okay, tick.’ It’s about whether, in response to the scenario presented in the paper, you’ve satisfied my markers that you grasp the practical impacts of how all the various components of the case interrelate.”

Allinson describes that web of relationships as “a cacophony of intertwining stakeholders. You have directors who are being told they no longer run the business, employees who are worried about their futures and creditors who may have heard about the company’s failure on social media and are concerned about how they’ll get their money back. 

“Furthermore, there are customers who’ll still want what they’ve paid for and, often, landlords who’ll be wondering when they can re-let the premises. All will be jostling for position amid a dynamic and fluid chain of events. For an IP to respond to all those elements demands real skill and expertise.”

For Allinson, the need to be a fulcrum between all those parties is why business sense is the most critical part of an IP’s technical knowhow. But there is another, parallel and crucially important, aspect to that. “Insolvency is about human beings,” he says. “And I believe passionately that personal empathy, within the bounds of professional responsibility, is crucial. 

“This is a distressed and distressing situation for many. So, being able to understand where everyone is coming from, and how to get them to work together constructively – without getting drawn into that pool of emotions yourself – is the mark of a great IP,” Allison adds.

Ethical code

ICAEW Head of Qualifications Strategy and Development Adam Birt agrees that striking a balance between empathy and focus is key. “Underlying all that, you must also observe an ethical code that requires you to put your hand up when you encounter an issue that falls outside your areas of technical expertise – meaning that you’ll have to rely on external help on that particular point.

“As an IP, you will be parachuted into situations that are at best complex and at worst quite fraught,” Birt adds. “When you walk into each situation, it may not be immediately obvious who are the key players in the web of stakeholders. So being able to identify them, then pull them all together around a plan, will draw on both formal and informal communication – plus strong problem-solving and decision-making skills.”

Birt points out that the majority of IPs are trained not just in insolvency but as broader finance professionals, too. “Certainly, a significant number of the total population of IPs are trained chartered accountants. As such, ICAEW looks every year at the skills and knowledge that are required of chartered accountants to ensure they are up to date with market needs.”

In terms of the insolvency brief per se, he says: “ICAEW provides a certificate that focuses on the specific subject-matter knowledge that IPs require on top of the broader skills platform. We are also one of the regulating bodies for IPs – so, through that presence, we work to ensure that IPs maintain the high levels of skills and knowledge that are needed.”

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