Volatility is the new normal and liquidity is on the line

^{Source 1: HSBC New Networks of Capital: The World Rewired
Source 2: HSBC Global Trade Pulse Survey}

These tight margins make treasury more pertinent than ever, due to their strategic role as the guardian of the business’ liquidity. After all, liquidity is the lifeblood of an organisation- a business can be profitable on paper, and still fail if due obligations are not met.

Effective liquidity risk management, however, is not just about ‘having cash’, it’s also about resilience. By maintaining real time visibility over cash flows and ensuring cash is in the right place at the right time, treasury can transform itself into a strategic enabler. anticipating pressure points early to navigate volatility and capture new opportunities with greater confidence.

Due to its potential impact, a good practice for a treasurer would be to include liquidity risk as part of an integrated risk management framework. Generally, the framework should begin by identifying risks, assessing potential impact, mitigating them, and finally, measures to continuously monitor and report risks.

^{Source: HSBC Treasury Solutions Group}

Liquidity risk typically arises from two broad factors. The first is systemic stress that hits everyone at once, such as a global pandemic or financial crisis. While treasurers can’t control these shocks, they can prepare for them by having contingency plans that enable continued access liquidity under stress.

The second driver is company-specific, shaped by company’s funding structure and day-to-day practices. Common pressure points include over-reliance on a single funding source (i.e a narrow customer base or one borrowing channel), credit deterioration or downgrades that restrict borrowing capacity, weak cashflow forecasting, and funding mismatches. This is where treasurers can make the biggest impact—strengthening governance, improving forecast accuracy, and building diversified, reliable funding options to reduce surprises and stay in control when risks arise.

In practice, these drivers do not operate in isolation. A weakness that looks manageable in normal markets can become a flashpoint during a broader shock when liquidity dries up and counterparties become more selective. Treasurers would need to have resilient liquidity management to build optionality so funding can keep flowing even when conditions change

As liquidity pressures vary by sector, treasurers should assess risk through the lens of their operating model, cash conversion cycle, and funding structure. For example, for private asset managers, liquidity stress may arise from market dislocation and constraints on exiting illiquid positions quickly, potentially compounded by increased redemptions from investors. Contrarily, corporates are typically more exposed to working-capital swings, delayed receivables, inventory build-ups, and capex timing.

Once the key drivers are clear, treasurers can then assess what really matters by doing liquidity “health checks”. These can include liquidity ratio measures of how comfortably the business can meet near-term payments (i.e current ratio), how quickly day-to-day activity turns into cash (i.e cash conversion cycle), and how much funding is available or utilised.

The real value comes from reading these signals in context, not in isolation. Comparing results with peers and wider industry trends helps treasurers understand whether they’re seeing a one-off change or a broader shift.

It’s also good practice to stress-test forecasts under realistic “what if” scenarios—like a dip in sales or slower customer payments. This helps quantify potential impact, spot early warning signs sooner, and make faster, more confident liquidity decisions when conditions change.

^{Source: HSBC Treasury Solutions Group}

To mitigate liquidity risks, treasurers can focus on three levers:

1. Set policy guardrails
2. Real-time cash visibility and forecasting
3. Optimise funding sources

A well-designed treasury policy is more than governance—it’s an operating system for liquidity resilience. It defines what “liquidity risk” means, how it’s measured, how it’s monitored, and exactly what happens when conditions change. In practice, this means setting risk limits (i.e. minimum liquidity headroom, maximum facility utilisation), maintaining liquidity buffers to cover stressed outflows and having a contingency plan with triggers and escalation actions when breaches happen. Treasury technology can turn policy from a static document into a living control framework. Real-time dashboards and automated alerts can be used to monitor limits and trigger predefined actions and escalation when they are breached.

Strengthening real-time cash visibility and forecasting is another key aspect in building resilience. Having a clear view of current and future cash positions helps treasury anticipate funding needs and investment opportunities, avoid unplanned overdrafts, and meet obligations through volatility.

In this area, there’s still significant room for industry-wide improvement: 54% of treasurers continue to rely on manual spreadsheets for cashflow forecasting³, which slows decision-making and reduces forecast accuracy.

^{Source 3: HSBC Global Treasury Pulse Survey}

However, today’s digital technology has changed the game. By integrating bank, ERP and TMS data via APIs, treasurers can gain a single, central view of cash, FX exposures and working capital across entities, enabling more timely forecasts and richer analytics.

Artificial Intelligence (AI) can then take forecasting from useful to predictive, identifying patterns, flagging anomalies and continuously refining projections. With 48% of businesses expecting AI to improve forecasting, modelling and decision making in the next 3 years¹, treasurers have a clear opportunity to leverage on the advancement.

In a real life example, HP inc. achieved real-time visibility of its cash positions, alongside improved analytics and forecasting through its collaboration with HSBC’s cashflow forecasting tool.

Find out more about why real-time treasury matters now, unpacking the market forces, risks and opportunities that makes it a strategic priority: Real-time treasury: real-time data, analyse and execute.

^{Source 2: HSBC Global Trade Pulse Survey
Source 3: HSBC Global Treasury Pulse Survey}

Insights alone aren’t enough. To act in time, treasurers need rapid access to funding through mobilising internal liquidity and diversifying external sources.

Internally, liquidity can be unlocked through centralised pooling and faster intercompany lending. Just-in-time liquidity tools and automated cash concentration minimise idle balances, reduce payment delays and lower reliance on external financing. Holcim is a strong example: by implementing a centralised treasury structure, it was able to fund more than 170 entities across 19 markets, strengthening oversight and control of group liquidity.

Treasurers can also tighten working capital cycles and unlock trapped cash by pulling both levers—accelerating receivables and optimising payables—using solutions such as receivables financing and supply chain finance. On the receivables side, an Indian insurance broker tackled a cashflow timing mismatch (upfront distribution costs versus commission collected over the policy life) by monetising expected, unbilled commission receivables over a multi-year horizon—an example of how receivables financing can be structured even in niche sectors like insurance, where it’s less commonly used. On the payables side, LPP, a polish apparel company, used supply chain finance to extend payment terms across its Asia-focused sourcing footprint, freeing up cash while still enabling suppliers to access earlier payment and additional funding. Both examples show how working capital can be improved from both ends of the cycle, even amid trade uncertainty.

Lastly, treasurers should maintain a diversified funding toolkit (such as committed bank lines) and ensure that facilities remain accessible across the markets where business operates, with utilisation and headroom monitored actively. As corporates become larger and more sophisticated, it also becomes imperative to diversify into alternative capital market sources such as commercial papers and repo.

Used together, internal and external funds reinforce each other, as internal liquidity can be mobilised first while external facilities remain in place to address funding timing mismatches. Our survey shows that firms pooling most of their balances are three times more likely to fund them internally rather than through third parties³, but at the same time, external diversified funding remains crucial, as 66% of businesses continue to seek alternative financing sources due to funding gaps².

Liquidity risk management isn’t a one-off exercise; it requires ongoing monitoring and reporting. Real-time monitoring of liquidity positions and tracking of risk indicators across entities is key in spotting gaps earlier, faster escalations, and quicker mitigating actions.

Data often poses a major roadblock. When data is decentralised across multiple sources and unstandardised, it’s hard to build a full accurate view of risk profiles. That’s why robust data strategy matters. Having accurate, standardised and well-governed cash, receipts, payments and forecast data is paramount.

With the right technology stack, liquidity risk becomes both visible and actionable. Real-time balances, changes in customer payment behaviour, and forecast facility utilisation are brought into a single view—so treasury can move quickly and confidently when it matters most.

In real life, liquidity stress rarely arrives with a calendar invite—it shows up as delayed customer receipts, supply chain disruption, a sudden FX movement, or a credit line that becomes harder to access at the worst possible time. That’s why active liquidity risk management needs to be embedded in day-to-day treasury activities as a core discipline, not a periodic exercise. Done well, it keeps operations running, preserves strategic flexibility, and turns uncertainty into something manageable rather than mission critical.

If you are looking to set up or strengthen your business’s liquidity risk framework, HSBC’s Treasury Solutions Group (TSG) can help review and ensure the right foundations are in place so you can stay ahead of volatility rather than react to it.

Hear from a first hand experience: ERM Group’s partnership with HSBC’s TSG helped drive greater global liquidity efficiency, transforming treasury operations through a global cash concentration structure that centralised liquidity and funding while optimising yield.