04 October, 2020
As businesses get to grips with navigating the current economic landscape, we expect the working capital position for most businesses to face further pressure. Robust working capital management will therefore be even more critical over the coming months. Optimising the working capital position of your business will not only support liquidity, but also support the longer term capital requirements of the business to support future growth, remain competitive and generate greater shareholder returns.
Historically, most organisations have been slow in realising working capital improvements, with only 12% of companies typically able to generate year on year improvements. However, given the current environment this is likely to change.
The unprecedented situation has presented several unique challenges for businesses in managing their working capital. Understanding these challenges is an important first step to assessing where potential opportunities or risks lie. These challenges include:
As companies activate their strategic plans for FY20/FY21 and beyond, there are a number of actionable steps that should be considered in order to stabilise your working capital position, manage down working capital investments where opportunity exits, and maximise the use of liquidity to support business recovery and growth.
The COVID-19 pandemic has challenged organisations to do things differently whilst unlocking different strategies and new ways to create value. As companies deliver on their future strategic plans after lifting COVID-19 restrictions, it is important to ensure that the working capital processes are supporting the business, not hindering. The level of liquidity available to the company will have a significant influence on the ability and speed to deliver that plan, and maximising working capital resources is an effective way to mitigate potential liquidity risks and provide the capital needed to fund the rebound as quickly as possible.
Find out more on how your organisation can respond to the potential impacts of COVID-19.
Anthony Manton
Partner, Business Restructuring Services, PwC Middle East
Tel: +971 04 304 3100
Dan Georgescu
Business Restructuring Services, Director, PwC Middle East
Tel: +971 5 6418 9776