International conflicts, an uncertain global economy, and volatile stock prices are prompting management teams to examine whether they would fare better in a liquidity crunch today than they did when the financial crisis struck seven years ago.
In a recent Oliver Wyman survey, we asked commodity-driven industrial conglomerates and asset-backed traders about four critical liquidity-risk-management best practices. The results found that only some players are following best practices in terms of liquidity-risk assessment and provision planning and not one company is consistently following best practices for liquidity-risk management across all four dimensions.
This article examines the five common mistakes companies need to avoid in liquidity risk management and how a multidisciplinary approach can work to identify a company’s liquidity risk requirement and address a potential funding shortfall.
The Five Common Mistakes in Liquidity Risk Management
Practices that should be avoided to prevent a funding shortfall
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