Cash & Liquidity Management
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SEB Guide to Liquidity Optimisation: An Integrated Approach: Foreword

by Erik Zingmark, Global Head of Cash Management

After many long months of tension and uncertainty, there are signs that the financial crisis is finally starting to subside. As the ‘real’ economy was slower to be affected, its recovery is also proving slower, and many industries, across both production and service sectors, remain gripped by recession, with the disappointment of lay-offs and postponement of capital projects. However, while pessimistic commentators predict that some of the worst-affected businesses may not have a realistic chance of recovery until 2011, it seems likely that others will experience a more rapid change of fortune as consumer confidence improves.

So, with the horizon in sight, although potentially further off for some, the cash imperative has evolved. Companies have put most of the necessary financial structures in place to help them to ride the storm, and they know what support they can expect from their banking partners. Today’s predicament, therefore, is not short-term liquidity management, but ensuring that target cash flow levels are generated in the medium to long term, so that companies can service their debt obligations as well as support their ongoing business activities. This is a slightly different liquidity issue than that which faced treasurers a few months ago. At that stage, liquidity forecasting was a priority to identify working capital gaps and the financing required to support the business; today, while ongoing forecasting remains essential for any business, as Robert Pehrson explains in his article in this Guide, the challenge is to deliver on these cash flow predictions.