In today’s fast-evolving environment, CFOs can help the organization navigate the current crisis by building a rapid response to liquidity risk.
Maintaining liquidity has suddenly become a critical business issue. As organizations look to navigate the current human and business crisis, many businesses see cash reserves rapidly depleting, with uncertainty over what cash if any can be collected from customers.
The pandemic has developed into an economic hurricane, cutting off whole sectors and geographies, an unthinkable scenario with the potential to wreak long lasting damage. It is vital that the Chief Financial Officer (CFO) and the Finance function takes the lead in helping management teams weather the storm, leveraging a range of tools to preserve precious reserves of cash, and support strategic alliances and relationships to stay afloat as the waters ahead become increasingly hard to navigate.
This crisis requires a collective response. Of course, one’s own survival is paramount, but large corporations also have a responsibility to support the wider economy. It is critically important that cash continues to circulate, especially to small and medium enterprises who account for 60-70 percent of employment in developed countries. The storm is still strengthening and likely to be slow moving. Organizations should be prepared to adapt normal practices for potentially a period of 1-2 years.
Responding to liquidity risk
In this fast-evolving environment CFOs should prepare a rapid response to liquidity risk, helping the organization better navigate through the current crisis and be in a leading position to accelerate the recovery. We recommend a targeted approach, establishing a dedicated team to focus on liquidity, while leveraging the right capabilities in data and analytics to deliver improved forecasting and scenario planning. The following steps are encouraged:
- Establish a liquidity control tower for a virtual workforce to focus on liquidity improvement.
- Improve understanding and execution of immediate cash flow levers.
- Work with business lines and leverage data that the control tower identifies to inform a set of liquidity improvement initiatives.
Accenture has a suite of tools that can help inform liquidity initiatives across three key areas:
- Improve cash visibility and forecasting.
- Strengthen working capital across receivables and payables.
- Offer insight-driven procurement to rapidly eliminate costs and strengthen the supply chain.
Targeted steps for rapidly responding to liquidity risk:
To accelerate speed to value, we suggest an iterative, sprint-based approach, focused on delivering specific initiatives as rapidly as possible. We have pre-built intelligent, dynamic applications that can be implemented in weeks, instead of months. These tools can be rapidly configured to work with client data, providing more immediate visibility of liquidity and insight to strengthen the firm’s cash position.
For a more detailed perspective on managing liquidity through different stages of the crisis please see our recent white paper on the topic—“Managing Total Liquidity in Response to the COVID-19 Crisis.” This piece is part of a series of documents developed by Accenture to help our clients respond to the global pandemic challenge. We have created a hub of all our latest thinking on a variety of COVID-19 topics.
If you have any specific questions on the topic and how we can help you, please contact me.
The opinions, statements, and assessments in this report are solely those of the individual author and do not constitute legal advice, nor do they necessarily reflect the views of Accenture, its subsidiaries, or affiliates.
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