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Facing financial pressure: Practical strategies for retail and restaurant leaders

Practical strategies for retail and restaurant leaders to manage financial distress: Assess operations, retain talent, maintain safety, and protect leadership.

04/14/2026 · 6 minute read

The retail and restaurant sectors are navigating an unprecedented wave of bankruptcies, fueled by a complex mix of macroeconomic pressures. Persistent inflation, shifting consumer behaviors, and rising labor and supply costs have created a challenging financial environment that requires careful consideration.

As these industries contend with shrinking margins and shifting market dynamics, adopting proactive strategies is more critical than ever. Leaders must take practical, forward-looking steps to maintain business continuity, protect their workforce, and safeguard leadership — both before financial distress arises and throughout restructuring efforts — to build resilience and successfully guide their businesses back to health.

Understanding the drivers of bankruptcy

Bankruptcy arises from a multifaceted interplay of financial strains and operational challenges, reflecting deep-rooted vulnerabilities that can profoundly disrupt a business’s stability and future viability.

For example, inflation drives up costs for goods, labor, and supplies, while shifting consumer preferences can impact foot traffic and discretionary spending. These factors squeeze profit margins and force difficult decisions.

When a business recognizes it is entering financial distress, short-term impacts like layoffs and declining morale often follow, which can further undermine productivity and operational safety. If left unaddressed, these issues can escalate into long-term consequences including complex restructuring, asset sales, and the daunting task of rebuilding workforce and safety culture post-bankruptcy.

The most effective way to prevent financial distress is through early, decisive assessment and strategic intervention. Leaders should begin by:

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Conducting comprehensive financial and operational assessments

Begin with a realistic evaluation of current business plans and financial health. Identify underperforming locations, products, or services and consider consolidation or divestiture where appropriate. Use data-driven analysis to prioritize resources toward the most viable parts of the business.

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Enhancing your operational footprint

Reassess store and restaurant locations in light of changing consumer behaviors, such as the shift to online shopping and delivery. Consider downsizing or relocating to areas with stronger demand, and invest in digital channels to complement physical operations. Streamlining your footprint can reduce fixed costs and improve overall efficiency.

Human capital risks and workforce strategies

In times of organizational distress, the stability and resilience of your workforce become paramount to successfully navigating complex challenges. Prioritizing human capital risks and implementing strategic workforce initiatives are essential to safeguarding institutional knowledge, sustaining employee engagement, and driving the collective effort needed to overcome adversity.

By proactively addressing these factors, organizations can mitigate disruption and position themselves for a stronger recovery. Some key priorities should include:

  • Conduct thorough workforce assessments to identify key talent and leadership essential to business recovery
  • Implement incentive programs aligned with turnaround milestones, such as retention bonuses, performance-based rewards, or equity participation, to motivate and retain employees
  • Prioritize retaining critical employees with institutional knowledge to maintain operational continuity, especially through bankruptcy or restructuring
  • Invest in upskilling and role redefinition to adapt to evolving business needs and enhance workforce stability
  • Develop and maintain a robust succession plan to prepare future leaders, supporting leadership continuity and minimizing disruption during times of transition
  • Maintain transparent communication about the company’s situation and future plans to foster trust, reduce uncertainty, and sustain employee morale
  • Use employee engagement surveys to gain insights into workforce sentiment and tailor rewards and benefits effectively

Together, these human capital strategies help support organizational resilience by aligning the workforce with evolving business needs during challenging times.

Operational and safety considerations

Maintaining safety training and resources during financial distress isn’t optional — it’s essential to protect your workforce and avoid additional, costly claims. Cost-cutting measures often target safety staffing and training, but this can lead to increased accidents, regulatory violations, and workers’ compensation claims, further straining financial resources. Some key priorities should include:

  • Prioritize safety training and resources even during cost-cutting phases to reduce accidents
  • Avoid deferred maintenance and reduced safety oversight, which can only increase operational risks and costly claims
  • Establish cross-functional teams to oversee safety, maintenance, and staffing, supporting operational continuity and regulatory compliance
  • Engage claims consulting experts to help manage workers’ compensation claims and regulatory compliance to minimize liabilities and refocus on core business objectives

Amid numerous competing priorities during financial distress, maintaining a strong focus on safety helps prevent avoidable risks and liabilities, allowing leadership to concentrate on stabilizing and rebuilding the business without the added burden of safety-related concerns.

Leadership and governance best practices

Protecting leadership is a cornerstone of effective governance during times of financial distress. Robust governance structures, including the involvement of independent directors, are essential for managing conflicts, overseeing restructuring efforts, and ensuring transparent decision-making that balances the interests of all stakeholders.

Equally important is safeguarding leadership through comprehensive directors and officers (D&O) insurance, which shields them from personal liability arising from difficult restructuring decisions.

Common pitfalls in D&O insurance coverage that can leave leadership vulnerable include:

  • Inadequate coverage limits: Policies with insufficient limits may not fully protect directors and officers against claims arising during restructuring or bankruptcy, exposing personal assets.
  • Bankruptcy exclusions: Some D&O policies exclude coverage for claims related to bankruptcy or insolvency proceedings, which is precisely when protection is most needed.
  • Lack of extended reporting periods, or tail coverage: Without extended reporting periods, claims made after policy expiration or after the company emerges from bankruptcy may not be covered, leaving leaders exposed to delayed claims.

To maintain transparent decision-making and balance stakeholder interests during financial distress, organizations should:

  • Establish strong governance structures that include independent directors to provide objective oversight and manage conflicts of interest.
  • Implement clear policies and procedures that promote transparency in board deliberations and decision-making processes.
  • Facilitate open communication channels among stakeholders, including creditors, employees, investors, and management, to foster trust and collaboration.
  • Conduct regular governance reviews to assess effectiveness and adapt to evolving challenges during financial distress.
  • Utilize independent directors especially in complex ownership situations, such as private equity, to help balance competing priorities.
  • Confirm leadership is protected through adequate D&O insurance coverage, including provisions for bankruptcy scenarios.
  • Engage experienced advisors to guide governance and risk management strategies, supporting balanced and transparent outcomes.
  • Document decisions thoroughly to provide accountability and clarity for all stakeholders involved.

Navigating the path forward proactively

In today’s challenging financial landscape, retail and restaurant leaders face a complex array of pressures that demand a comprehensive, proactive risk approach.

One of the most effective strategies organizations can adopt is early engagement with risk and insurance advisors—before liquidity crises arise. This proactive involvement helps identify potential risks, develop contingency plans, and simplify restructuring processes, ultimately reducing both the cost and complexity of financial recovery.

Marsh’s broad advisory capabilities and solutions across risk and insurance, including workforce strategy, claims consulting, financial and professional liability, contract review, and beyond can help address you focus on stabilizing and growing your business amid challenging market conditions. With the right strategies and expert support, you can weather the current storm and emerge stronger and more resilient in the evolving marketplace.

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To learn more about how best to protect your organization amid financial pressures, speak with a Marsh representative.

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