Strengthening the core.

• Author: Burt, Tim

Adaptability has been long recognized as necessary to survival. Indeed, Charles Darwin has said, "It is not the strongest of the species that survives, nor the most intelligent that survives, but the one most responsive to change."

Consistent across panelist testimony is flexibility and buoyancy in response to unprecedented market challenges. The ability to turn challenge into opportunity--a key attribute exhibited by panelists--reflects their adaptability and resilience.

Amidst scarcer and more costly credit and liquidity, companies are focusing on opportunities to optimize working capital. With a new perception of the risks at hand, they are gaining transparency. And with financial services staffs leaner than ever, companies are refining their internal processes to optimize scarce resources and strengthen internal controls.

Focusing on Working Capital And Risk

Given the multi-faceted nature of risk and working capital--each with multiple components and complex interdependencies that drive them--companies need to orchestrate their management across functions and business processes. Panelists uniformly described increased awareness of risk and working capital across their organizations. Moreover, related practices have become routine--part of day-today business management.

Working Capital Management

Panelists described gaining a stronger command of working capital metrics (e.g., Days Payables Outstanding, Days Sales Outstanding, Days Inventory Outstanding). At several companies, working capital metrics have been instilled as a discipline within the lines of business--even at the factory level for one manufacturer.

Improving operating cash flow is a key objective. Panelists are looking for process improvements to enhance working capital efficiency and drive internal liquidity. Such enhancements, they said, will put their companies in a stronger position post-recession.

Working capital management must integrate a company's entire ecosystem--its banks, customers, suppliers and other counterparties--to drive the levers that facilitate optimization. Market conditions have proven that the health of each member of a supply chain strengthens the supply chain as a whole. In an adverse economic climate--with tight credit and liquidity markets--working capital becomes critical to the viability of a supply chain. Panelist testimony highlights the importance of an integrated view of working capital that considers the needs and challenges of trading...