A Differentiated Approach to Selecting the Financial Recovery Mechanism for Enterprises

Abstract

This study examines the theoretical and methodological foundations for selecting enterprise financial recovery mechanisms in the context of increasing financial distress and an unstable economic environment. The characteristic features of the main types of corporate financial crises, namely profitability crisis, liquidity crisis, and solvency crisis, are systematized. The article proposes a classification of enterprise solvency conditions, distinguishing preserved solvency, impaired solvency, and critical insolvency according to an enterprise’s ability to meet its financial obligations to creditors in a timely and full manner. The study substantiates the need for a differentiated approach to selecting financial recovery mechanisms based on the type of financial crisis, the enterprise’s solvency condition, and its strategic development priorities. An algorithm for selecting enterprise financial recovery mechanisms is developed, relying on a comprehensive assessment of the type of financial crisis, solvency condition, and strategic priorities. The proposed algorithm includes the stages of initial financial diagnosis, identification of the type of financial crisis, assessment of solvency, and determination of the strategic priority for selecting preventive, stabilization, or rehabilitation mechanisms. Furthermore, a set of managerial instruments and measures is defined for each mechanism, and the necessity of repeated assessment of key financial indicators is substantiated to determine the enterprise’s subsequent development path, including transition to financial stabilization or the initiation of bankruptcy and liquidation procedures. The proposed algorithm provides a logical and consistent framework for managerial decision-making and enables a differentiated selection of financial recovery mechanisms according to the enterprise’s financial condition. This approach enhances the soundness of anti-crisis management and improves the prospects for restoring long-term financial stability. The practical significance of the research lies in the applicability of the proposed algorithm for enterprise managers, financial managers, consultants, and other anti-crisis management practitioners in diagnosing the financial condition of enterprises, selecting appropriate financial recovery mechanisms, and designing financial rehabilitation programs. The proposed approach contributes to more efficient managerial decision-making, timely restoration of solvency, strengthening of financial resilience, and the sustainable long-term development of enterprises.