Six things every restructuring, turnaround and insolvency professional should know about AI

Artificial intelligence (AI) has rapidly moved from being a niche technology discussion to a boardroom issue for professional services firms. But until recently there has been little evidence on how it is being used across the restructuring, turnaround and insolvency profession.

R3, the association of business recovery professional's new report, The impact of AI in UK restructuring, turnaround and insolvency practice, produced with technology company Alph4, provides perhaps the first comprehensive picture of current adoption, opportunities and barriers within the profession. Based on a survey of R3 members and interviews with practitioners, legal professionals and technology providers, the findings paint a picture of a profession that is enthusiastic about AI's potential but is still in the early stages of adoption.

Here are six key takeaways from R3's research.

1. Professionals are enthusiastic about AI's potential, but advanced use remains rare

The profession has made good progress on digitisation. More than 80% of respondents reported using document scanning and digitisation, while over half are using generative AI tools such as Microsoft Copilot or ChatGPT.

However, fewer than one in ten respondents reported using machine learning or AI agents. The findings suggest that while many firms are experimenting with AI, relatively few have embedded it into core processes.

2. The biggest opportunities are in data-heavy and document-intensive work

The most common applications were data analysis, data extraction and document review. Other areas where AI is being used included workflow management, investigations and knowledge chatbots.

This is perhaps unsurprising as the nature of restructuring, turnaround and insolvency work involves analysing large volumes of information, often spread across emails, bank statements, creditor correspondence and company records. AI appears particularly well suited to handling these information-intensive tasks, helping practitioners identify patterns, summarise information and identify key issues more quickly.

Examples include one company that uses AI to carry out due diligence on large and complex datasets and to design automated workflows. Meanwhile forensic bank analysis, document review and the use of large language models to interrogate digital archives are already being used by some forward-looking firms.

3. Professional judgement remains indispensable

Readers will be pleased to know that one theme that emerged consistently throughout the report was that AI is not expected to replace insolvency professionals.

Instead, the most successful applications of AI involve automating routine tasks and improving access to information. Human oversight remains essential, particularly when dealing with contentious cases, complex investigations and decision-making.

Interviewees repeatedly highlighted the importance of ensuring that AI outputs are reviewed and challenged appropriately, enhancing professional judgement rather than substituting it.

4. Data security remains the profession's biggest concern

More than half of respondents identified data security and confidentiality as the primary barrier to adoption. Many expressed concerns about the use of public AI tools and the potential risks associated with uploading sensitive client information.

As a result, many companies favour systems operating within secure environments, such as Microsoft Copilot operating within an organisation's Microsoft 365 environment. However, these solutions can be more expensive and may be harder for smaller firms to implement.

The message from practitioners was clear: trust and governance will be as important as capability.

5. The profession wants clearer regulatory guidance

Only 11% of respondents believe current regulations and professional standards adequately address the use of AI in insolvency work. Many interviewees highlighted the absence of practical guidance on what constitutes acceptable use of AI in professional assignments.

The report recommends clearer guidance covering issues such as data security, human oversight, quality assurance and disclosure. It also identifies professional indemnity insurance as an area requiring further discussion between the profession, regulators and insurers.

6. The biggest challenge may be people, not technology

The profession broadly agrees that AI can improve efficiency, reduce administrative burdens and support practitioners in their work. However, more than three-quarters of respondents expect AI to change the skills required in practice over the next five years, with digital literacy, ethical understanding and advisory skills becoming increasingly important.

Many respondents questioned whether junior professionals would gain the experience necessary to identify mistakes if routine tasks become increasingly automated.

This means AI adoption must go hand in hand with investment in training, governance and leadership.

Looking ahead

We hope this report stimulates discussion about how AI is being used in practice, how firms can adopt it responsibly and how the barriers to wider adoption can be addressed. R3 will continue that conversation including at events like our Smaller Practices Group forum, and we encourage the profession to share their experiences and views with us.

Report author Rob Guidi sums it up saying: 'The greatest opportunities lie in using technology to support practitioners, automate routine tasks and free up time for higher-value advisory and investigative work. As the technology evolves, the opportunity is not simply to do the same work faster, but to rethink how professional services are delivered.'

Go to R3's website to download the report: The impact of AI in UK restructuring, turnaround and insolvency practice