Early warning systems for financial distress: International developments
DOI:
https://doi.org/10.17524/repec.v20.e3843Keywords:
Early warning systems. Financial Distress. Regulatory Practice.Abstract
Abstract
Objective. This editorial examines the evolution and effects of mandatory early warning systems for financial distress, focusing on the European Directive (EU) 2019/1023 and its Italian transposition (Legislative Decree No. 14/2019). It seeks to understand how this preventive model reshapes corporate governance, expanding managerial responsibility and promoting practices for the early detection of financial imbalances.
Method. The study adopts a qualitative and comparative approach, analyzing the conceptual and operational foundations of the European regulatory framework and contrasting them with the Brazilian legal environment, where preventive mechanisms remain voluntary. The discussion integrates regulatory references, academic literature, and international practices in governance and risk management.
Results. The analysis shows that mandatory early warning systems strengthen organizational resilience, structure internal processes for continuous monitoring, and reduce the likelihood of insolvency, particularly for small and medium-sized enterprises (SMEs). In Brazil, the absence of mandatory requirements maintains a reactive system, limiting organizations’ preventive capabilities.
Contributions. The editorial broadens the debate on governance-based crisis prevention, offering practical implications for SMEs and for accounting and consulting professionals, as well as identifying research avenues related to organizational culture, financial performance, and the effects of voluntary adoption of such systems.
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Copyright (c) 2026 Marco Fasan, Francesco Scarpa, Eduardo Flores
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