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Practical recovery test: advantages, limitations and strategic vision

published on 19 September 2025 | reading time approx. 4 minutes

The practical test for verifying the reasonable feasibility of crisis recovery is a technical tool that allows the feasibility of a corporate restructuring plan to be assessed. Although it is useful for assessing recovery strategies, it has advantages and disadvantages that must be carefully taken into account.

The practical test for verifying the reasonable feasibility of recovery has established itself in recent years as an important methodology for assessing the feasibility of corporate recovery plans, especially in crisis scenarios. This tool is designed to verify whether the actions proposed by a company to emerge from the crisis are actually feasible within a reasonable period of time. This test analyses various aspects, including the financial situation, the business plan and market prospects, in order to determine whether recovery can actually be achieved.

This revolutionary tool, introduced by Article 3, paragraph 2, of Decree Law No. 118/2021 by the Italian Ministry of Justice with the aim of providing guidance to entrepreneurs and experts on how to conduct a recovery attempt through negotiated settlement of the crisis, as anticipated, has both advantages and disadvantages. The former include:

objectivity and transparency: One of the main strengths of the practical test is its ability to provide an objective assessment of the situation. It is based on quantitative and qualitative parameters that minimise the risk of subjective assessments or assessments influenced by external factors. Decisions relating to the recovery plan are more transparent and can be justified with concrete data, which increases trust among stakeholders;
verification of the feasibility of the recovery plan: The test provides a clear indication of the sustainability of the recovery plan. A plan that passes the test is considered viable, thus reducing the risk that a company will take actions that cannot actually lead to an improvement in its situation. This avoids unnecessary investment of time and resources in strategies that may prove ineffective;
greater confidence by creditors and investors: The application of the practical test also has a positive effect on creditors and investors. When creditors see that the recovery plan is supported by an objective assessment, they are more willing to cooperate, for example, by renegotiating debts or accepting other forms of relief. Similarly, investors are more likely to finance a company that demonstrates it has a concrete and achievable recovery plan;
prevention of legal and judicial risks: The rigorous application of a test that demonstrates the feasibility of a recovery plan significantly reduces the risk of legal action. In the event of disputes with creditors or other interested parties, a plan supported by the test provides a solid support against possible bankruptcy or insolvency claims.

The latter, on the other hand, include:

risk of rigidity and overestimation of the plan's stability: Although the test is designed to be objective, it may not consider all the dynamic and unpredictable aspects that can affect the outcome of the recovery plan. Ever-changing markets, new regulations or unforeseen external events can compromise a plan that initially seemed reasonably achievable. In other words, the test may give too rigid view of the company's situation, failing to capture the complexity of external factors;
over-reliance on test results: Another risk is over-reliance on the test results, which could lead entrepreneurs and creditors to believe that the success of the recovery is guaranteed, when in fact there may be other factors not considered that could compromise the plan. The objective assessment proposed by the test is not unfailing and cannot replace the necessary flexibility in managing business situations in crisis;
limited adaptability to different business situations: Every business has unique characteristics, and a practical test based on standardised models may not be suitable for all situations. For example, a start-up in the development phase may require different approaches than a large company with an established structure. Difficulties may therefore arise in adapting the test to the specific needs of each business.

Conclusions

The practical test for verifying the reasonable feasibility of recovery is a crucial tool for assessing the strength and feasibility of a business recovery plan. Its application introduces elements of objectivity and transparency into the assessment process, strengthening the credibility of the plan in the eyes of stakeholders and supervisory bodies. However, it is also essential to recognise its limitations: methodological rigidity and the risk of overestimating the plan's resilience in uncertain scenarios can reduce its effectiveness if not properly contextualised.

For this reason, the test should not be considered a purely formal exercise but should be integrated into a broader analysis capable of capturing the evolving dynamics of the economic and sectoral context. Only when accompanied by a strategic and flexible vision can the test truly support the recovery process, contributing to an informed and sustainable assessment of business continuity.