Treasury Strategy & Transformation
Published  7 MIN READ
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Traversing the Liquidity Gap

In this month’s edition, we are privileged to be able to interview Dominic Broom, Head of Market Development, Treasury Services EMEA, The Bank of New York Mellon, who talks about pressures and challenges that are facing many mid-cap companies, and how their banks can help.

What keeps treasurers of mid-cap companies awake at night?

In this environment, many are concerned by availability of working capital and by liquidity management. Throughout the supply chain, suppliers are reducing the credit terms they are prepared to offer, to the extent that payment in advance is increasingly sought. This obviously squeezes companies’ working capital, particularly if they are also finding that their own customers are seeking to extend payment terms or are delaying payment, which is the experience of many firms. These opposing pressures can lead to potentially crippling cash flow difficulties, leaving companies at risk of being unable to meet their obligations. In addition, the risk of payment default from customers is increasing, further intensifying the liquidity challenge for theoretically solvent companies.

In the current market too, the overall situation is inevitably exacerbated by the substantial decrease in the availability of credit. This makes it harder for treasurers to find and put in place funding bridges to help them traverse liquidity gaps.