Local companies, particularly in the oil and gas sector, had been lulled into complacency and are now being jolted by the sharp downturn, according to consulting firm EY.
Mr Karambir Anand, a partner at EY's transaction advisory services, said there had been "an element of denial" when the firm spoke to energy players between six and eight months ago .
"The pace and severity of this downturn... has taken everybody by surprise. Even if you think some multinational companies were well placed, if you track impairments and write-offs in the last 12 months, you will see how large the problems are."
Although the downturn had been a long time in the making, Mr Anand said that the perceived abruptness of the market turmoil means that management teams were not trained to react quickly.
If you take a lot of time to streamline and improve operations,added Mr Anand, the company will continue to bleed.
"One of the biggest challenges is that people in the C-suite have not seen a downturn of this nature in their working lives. The pace they need to get to is something they are not used to."
He said that many energy players had not been worried initially, citing the V-shaped recovery in commodity prices after the 2008 financial crisis. This time, that rebound has not happened, leaving many companies with fewer options.
Complacency was a factor for companies being slow to react. Ms Angela Ee, also a partner at EY's transaction advisory services, said: "There was expectation that money will come in, debt will be refinanced."
She said that distressed companies coming to EY usually require a short-term action plan to monitor and manage cash. Typically, a 13-week short-term cash flow forecasting tool is used to determine funding needs and identify critical payments.
While divestment could be an option, Ms Ee said the potential buyers, mostly global multinationals and private equity players, were waiting to buy assets at a very deep discount.
"It's very painful for companies. You are talking about 20 per cent of the actual market value, not a 20 per cent discount."
The silver lining in the market turmoil is the discounted assets on sale for companies with deep pockets, but the partners said that they have not seen a flurry of deals yet.
However, significant consolidation is on the cards over the next 12 months. EY said in a report this month that as a precursor to mergers and acquisitions, joint ventures and strategic alliances are expected to be commonplace as companies learn to share knowledge to capture efficiency savings and technological advancement.
The EY partners said that more sectors in Singapore might become vulnerable in this downturn, singling out commercial real estate as one at risk.