18. May 2020
In the last 20 years, the Trinity Team has spoken with many treasurers and CFO’s about liquidity planning and the use of different scenarios. We noted that most of them have only one forecast. A few treasurers develop three scenarios (a best-, base and worst case scenario). We believe the current crisis taught us that these three scenarios might not be sufficient; scenario planning should be broadened to really stress-test your company’s future. The question of course is: how to do this in an efficient way (or what tools do you need?) The added value of corporate treasury is to manage risk and liquidity planning under all circumstances. We all know that people aren’t really interested in cash flow planning when conditions are easy and profitable. Before the lockdown-period started, liquidity planning was probably easy, compared to the current dynamic environment we find ourselves in. The fact that people are now working remotely complicates the matter even more, if the right tools aren’t used. But what are the key characteristics of the ‘right‘ tools for liquidity planning?
Multiple planning structures
First of all, you need a planning structure. This can be a simple one or a structure with more rows (to capture more cash flow categories). It all depends on the type of company. A requirement for a right tool is that it can handle several structures in parallel.