How Do Companies Begin Their Journey Toward Bankruptcy?

The Bankruptcy Commission in Saudi Arabia announced the registration of 375 companies entering bankruptcy proceedings during the first half of 2026. Some may read this figure as an economic indicator or a result of a slowdown in certain sectors; however, it does not tell the story of bankruptcy itself, but rather the story of the decisions that preceded it by years.

The Roots of the Problem, Not the Outcome

• Bankruptcy does not begin when liquidity runs out, nor when a company stops settling its obligations, nor when a court issues its verdict. Bankruptcy begins years before that; it starts when a company stops learning, and when yesterday's decisions remain today's decisions, even though the market is no longer the same market.
• The world is changing at an unprecedented pace; customer needs are shifting, technologies are reshaping industries, and business models are constantly evolving. Competition no longer comes only from those you know, but from a startup, a digital platform, or a new business model that did not even exist a few years ago.

In this world, the question is not who has more resources, but who learns faster?

Crisis Management and Quality of Thinking

• The ability to learn has become a competitive advantage, adaptability has become an economic asset, and making decisions on time is a prerequisite for survival. That is why many companies do not falter due to a lack of resources, but because they are late to realize that the rules of the game have changed.
• The problem usually begins quietly: a slight decline in sales, a drop in margins, a delay in product development, and the loss of some customers. Management then interprets this as a temporary circumstance, thereby postponing difficult decisions, restructuring, reviewing the business model, and changing leadership. With every delay, options dwindle and the cost of the decision rises.
• Until the financial crisis becomes the clearest symptom, but it is rarely the actual cause. In many cases, liquidity is the last thing to collapse, while the first thing to collapse is the quality of thinking.
• Every case of bankruptcy is, at its core, a story of a team, management, and governance; a story of decisions that were made, decisions that should have been made but were not, and decisions that were delayed until they lost their value. Companies do not make decisions; people do.
• Therefore, the quality of the team is one of the most important assets of any institution. An outstanding team does not add value because it works more, but because it sees further, reads changes early, challenges old assumptions, makes difficult decisions on time, and possesses the courage to admit that what succeeded yesterday may not succeed tomorrow.
• Team quality is not just a human resources issue, but a strategic one that determines a company's ability to learn, adapt, create value, and endure. It does not simply show up on the organizational chart; governance is not measured by the number of policies, and management is not measured by the number of meetings, but rather by their ability to face reality as it is—not as they wish it to be—and by their courage to review assumptions before the market forces them to.

The question that every board of directors should ask is not whether we are making profits today, but rather: Is our way of thinking still keeping pace with the world we operate in?

Reading the Internal and External Landscape

• The most dangerous thing that can afflict any institution is not competition, nor rising costs, nor an economic slowdown, but rather becoming preoccupied with searching for the causes of its faltering externally. Thus, it blames the market, competitors, and circumstances, while the real problem may lie within—in the way of thinking, the quality of the team, the leadership, the governance, the decision-making mechanism, and the corporate culture.
• It is important to realize that bankruptcy figures do not represent the whole picture. There are companies that shut down before entering legal proceedings, others whose owners withdraw, others sold at major losses, and others that continue legally but have lost their ability to grow. The numbers are only the visible part, while the larger part remains inside the companies, where the decisions that shape their future are formed.
• Markets do not bring down companies suddenly; instead, they give repeated signals. Those that catch them early rebuild themselves, while those that delay, show arrogance, or think that yesterday's success guarantees tomorrow give time the opportunity to turn small problems into major crises. Every company that declared bankruptcy went through hundreds of meetings before reaching the court, and in every meeting, there was an opportunity for a different decision; but a decision that is delayed for too long may become completely worthless.

Conclusion

Companies do not collapse on the day bankruptcy is declared, but on the day they stop learning, when the quality of the team and the quality of thinking decline, and when preserving the past becomes more important than preparing for the future. Results are nothing but the delayed impact of thinking.

By: Mohammed bin Saleh

Management and Finance Enthusiast