Singapore – J.P. Morgan today announced the launch of the J.P. Morgan Working Capital Index, which enables companies to benchmark their working capital performance against industry peers. By capturing and consolidating the working capital metrics from the companies listed on the S&P Composite 1500 index, it provides firms with valuable insights into the working capital performance of some the world’s largest and most influential companies. In addition to the launch of the new index, J.P. Morgan also published a report on working capital trends from 2011 to 2018.
“Industry benchmarking is typically the first step for many companies looking to optimize their working capital, but there are limited tools available to do this effectively, primarily because of the lack of access to reliable industry data. We developed the Index to help our clients identify inefficient use of liquidity within their organizations and explore opportunities to improve their internal sources of funding,” said Gourang Shah, head of Treasury Services Solutions for Asia Pacific at J.P. Morgan.
The analysis of the Index found substantial liquidity trapped within the supply chains of the S&P 1500 companies, with the potential to release an estimated $460 billion through working capital optimisation programs. The industries that have shown the most improvement in optimising working capital between 2011 and 2018 are utilities, consumer staples and logistics. Sectors that have been challenged over the same period include aerospace and defense, semiconductors and media, according to the report.
“The differences in working capital performances both across and within industries are driven by a myriad of internal and external factors and it’s important for companies to understand the drivers to formulate the best strategy to optimise internal liquidity. We view the J.P. Morgan Working Capital Index as a starting point to benchmark performance, guide action plans and monitor progress,” Shah added.
“In conversations with our clients, it is clear CFOs and treasurers are increasingly committed to improving internal sources of liquidity, given the rapidly evolving environment in which they operate. The J.P. Morgan Working Capital Index is designed to provide a credible benchmark for them to set specific and quantitative goals in their working capital strategy and execute accordingly,” said Sridhar Kanthadai, head of Wholesale Payments, Asia Pacific at J.P. Morgan.