Liquidity Risk

Uncovering The Hidden Cause Of Corporate Shocks

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. Download the Oliver Wyman Ideas app to read in full.

1. Choosing a narrow risk perimeter

2. Overlooking Tail Events

3. Understanding The Importance of Time

4. Misjudging Funding Risks

5. Operating in Silos

Liquidity Risk