Just 41% of C-suite execs are ‘highly confident’ in their company’s cash and liquidity management

How confident are execs when it comes to their company’s cash and liquidity positions? Less and less, according to a new report.

This morning, Deloitte released the results from a poll taken during the firm’s webcast “Cost containment and cash generation downturn planning.” CFOs were among the 590 C-suite executives surveyed.

Roughly 79.5% of respondents say they’re highly or somewhat confident of their company’s cash and liquidity management abilities, down about five points from 84.6% in October 2020, as the pandemic raged. Taking a deeper look at the findings of the poll taken in February, just 41% of respondents say they’re highly confident, compared to 46.7% who felt the same in October 2020.

“I’m not surprised with what we’re seeing right now in the survey results,” says Ryan Maupin, a managing director and national leader of Deloitte’s Turnaround & Restructuring practice. And now with the tightening liquidity at banks, “I would expect a heightened sense of urgency in some liquidity management confidence levels,” Maupin says. Services for cost cutting or cost containment and services around cash, liquidity management, and working capital have all seen an uptick in demand over the past few months, he says.

Time to flex short-term liquidity muscle

“When we see a need for liquidity management, we see companies struggle with bridging the gap between—what are we forecasting for our P&L on the medium- to long-term? And what do we need to do to gauge and manage liquidity in the short term?” Maupin explains.

“What CFOs need to focus upon right now is making sure that they’re dusting off whatever plans, protocols, and processes they have in place for short-term cash flow and liquidity forecasts,” he says. Short-term liquidity is “not a muscle that companies flex often, or need to in better economic times,” but it should always be a priority, Maupin says.

Along with increasing interest rates, “the other area where the Fed is looking to combat inflation is to constrict liquidity,” Maupin explains. “You’ve seen banks take a pretty significant hit in terms of the losses that they’ve experienced, particularly mortgages, over the last several months,” he says.

Maupin is seeing instances where companies that usually seek financing from traditional banks are now turning to private credit. “But private credit is expensive and more expensive than a traditional bank loan,” he says. “A concern for CFOs looking for ways to free up liquidity is—how expensive is that debt going to be?”

Cost containment

Chicago Fed President Austan Goolsbee is “certainly getting vibes” in the market that “the credit crunch or at least a credit squeeze is beginning,” he told Yahoo Finance on Monday.

“As borrowing capacity and cash availability start trending lower, we are seeing a renewed focus on real-time liquidity and working capital management,” says Michael Quails, a managing director of Deloitte Risk & Financial Advisory’s working capital management practice. “We expect this to continue for the rest of the calendar year.”

In the worst cases, a lack of available liquidity can lead to widespread defaults and even bankruptcies. A May 4 report by S&P Global Market Intelligence found that U.S. corporate bankruptcy filings slowed in April (54) from a spike in March (70), which was the highest monthly bankruptcy tally since July 2020, according to the report.

“Some of the top cost containment strategies we’re seeing organizations pursue presently are direct spend shopping and indirect demand management,” Quails tells me. Regarding “direct spend shopping,” companies are starting to price shop inputs (items, commodities, etc.) across vendors and focus on lead times and minimum order quantity, Quails explains. With “indirect demand management,” companies need to “clearly identify where they are indirectly spending and focus on where demand can be managed down,” he explains.

“We expect to see a more consistent cost management focus on these two strategies in the coming months,” Quails says.

Sheryl Estrada
sheryl.estrada@fortune.com

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Big deal

This morning, ISACA, a professional association focused on IT governance, released its "State of Digital Trust 2023" report. It looks at responses from more than 8,000 global digital trust professionals on digital trust benefits, obstacles, priorities, responsibilities, and budgets, and shows that 76% said digital trust is important to digital transformation.

The top five benefits of digital trust as noted by respondents: a positive reputation (67%), more reliable data for decision-making (57%), fewer privacy breaches (56%), fewer cybersecurity incidents (56%), and stronger customer loyalty (55%). However, for every move forward, organizations face their own set of obstacles. The top obstacles to achieving digital trust in their organizations are lack of skills and training (52%), lack of leadership buy-in (42%), and lack of alignment with enterprise goals (42%).

Courtesy of ISACA

Going deeper

"How Midsize Companies Can Keep Up with A.I.," a report in Harvard Business Review, explains why innovations shouldn’t be approached with a narrow, short-term focus. Midsize companies that chase each new trend can find themselves over-committed and under-prepared when that trend wears off. The report suggests companies focus on the following questions: How does this current innovation build on the technology already in place, and what can we expect it to build toward in the future?

Leaderboard

Todd Tuckner was named Group CFO at UBS. Tuckner will take on the role at the close of the acquisition of Credit Suisse. Having joined UBS in 2004, Tuckner is currently CFO and head of business performance and risk management for Global Wealth Management and has held various leadership roles across finance in the U.S. and Switzerland. Tuckner will succeed Sarah Youngwood, who has decided to leave the firm after the transaction closes. Youngwood joined UBS in 2022.

Howard Fu was promoted to CFO and treasurer at Procore Technologies, Inc. (NYSE: PCOR), a global provider of construction management software, effective May 8. After four years as CFO and treasurer at Procore, Paul Lyandres is stepping into the newly-created president role to lead the fintech organization at Procore. Fu has more than 20 years of experience in finance leadership positions. He most recently served as SVP of finance at Procore for two years. Previously, Fu served as VP of financial planning and analysis at DocuSign. Before that, he led the sales finance and M&A finance teams at Salesforce as the company continued to grow at scale.

Overheard

“I wouldn’t like to devalue climate change. I wouldn’t like to say, ‘You shouldn’t worry about climate change.’ That’s a huge risk too. But I think this might end up being more urgent.”

—Geoffrey Hinton, the British-Canadian computer scientist who earned the title “the godfather of A.I.," told Reuters that even the threat of climate change doesn’t compare to the risks associated with A.I.