Among its harsh lessons, 2020 reminded the business world that continuous access to liquidity can't be taken for granted. Substantial economic crises like the events that unfolded in 2020 are unpredictable, and interruptions to liquidity are inevitable. Even beyond the economic downturn caused by the pandemic, other factors are driving increased liquidity risks. Surely, if cash is the lifeblood of the company and access to it is increasingly risky, then this is the opportune time for CFOs to revisit how they manage the usage of liquidity and preserve their timely access to it. KEY FACTORS The long-held assumption that access to liquidity is plentiful and continuously available can no longer be taken for granted Even outside of sudden "liquidity droughts" caused by global economic crises, liquidity risks have been steadily growing due to new bank regulation, increased fraud, globalization and new technology Finance functions need to strategically manage the usage of and access to cash and liquidity like other tangible, risky assets, such as talent, land and machinery. Expertise and technical solutions are at critical mass now to support CFOs in adopting an "enterprise liquidity management" approach Engaging in enterprise liquidity management means dedicating time, energy and resources to activating all possible sources of liquidity the holistic optimization of treasury, corporate payment and supply chain finance transactions It also means reimagining how a company connects to its sources of liquidity. It should be an integral component of the broader digital transformation that finance departments are undergoing

3 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME SHATTERED ASSUMPTIONS & NEW IMPERATIVES A low-interest-rate environment helps drive the commonly held assumption that there will always be continuous and easily available access to liquidity. But the reality for corporates tells a different story as the liquidity transmission mechanism (from central banks to financial market to bank account) has had increasingly frequent "outages" and become more complex. The latest example was the widespread lockdown of businesses and 100-year recession caused by the pandemic. And, of course, the credit crisis of 2008 and the subsequent Great Recession created unforeseen liquidity crises on a global scale. Aside from pandemics and other Black Swan events that can cause global economic meltdowns, other factors are at play in driving up risk in the liquidity transmission mechanism for individual companies. A trend that is driven by four recent changes in the market: Bank regulation Since 2008, regulators have imposed an ever-increasing number of rules to curb banks that have, in turn, created complex compliance rules for corporate finance. Banks have more incentives to err on the side of caution when they have compliance concerns about a corporate's financial practices, which can create a dangerous snowball effect on liquidity access at the company level. Fraud Fraud has become a larger problem as companies expand globally, with phishing attacks, data hacks, ransomware attacks and other cybersecurity schemes backed by international criminal syndicates and rogue actors becoming more and more sophisticated. As 2020 came to a close, news reports kept spiraling around a malicious hack of government agencies and private companies that had cybersecurity and national security experts in overdrive to determine and stem the damage. Eighty-five percent of companies face payment fraud attempts at least a few times per year, according to PwC.

4 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME Globalization International expansions have forced CFOs to deal with cross-border issues involving suppliers, customers and financing. Thirty-nine percent of companies with annual revenues of $1 billion or more operate in more than 25 countries, according to Eurofinance. International money movements add complexity to strategically optimizing cash usage, across various currencies, regulatory jurisdictions, intermediary bank networks, payment formats and communication standards. New Innovations Innovations have increased the connectivity options available to corporate finance to provision liquidity. A landscape once dominated by financial institutions now features more and more specialized providers, including new payment providers, fintech lenders and marketplaces. Questions have arisen about the operational integrity of and connectivity to these new counterpartieswhether they are robust, secure, fully automated and standardized. That means harnessing those innovations, using legacy connectivity approaches, comes with new risks for continued access to liquidity. So no matter how accommodating monetary policy is, liquidity flows into real economies through an increasingly global network of liquidity providers, which has demonstrable risks. In the U.S. financial system, for example, non-bank financial institutions now hold more than double the financial assets of traditional banks, according to the Centre for Economic Policy Research. Liquidity is emerging as a "risky" corporate asset.

5 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME LIQUIDITY AS A RISK ASSET While cash is the lifeblood of companies, most companies don't treat it as such. Instead, most finance units manage cash through accounting navigation. The general belief has been that if cash is managed based on accounted income and expense, then cash, with some operational support to manage bank account transfers, will broadly manage itself. Viewing a company's cash and liquidity as another risk asset means applying similar practices already in place for other assets such as real estate, machinery, customers, suppliers and human capital. Corporations have people, processes and systems in place which focus on strategically planning these assetsproducing a comprehensive and detailed understanding of their enterprise wide current state, optimal allocations to activities and forecasted future requirements to actively manage them. With human capital, for example, a Chief People Officer would expect to understand, on demand, where all of the company's employees are, what they're accomplishing and details about their projected career trajectories. Yet a recent PwC survey showed an average of twenty-five percent of all cash held by companies is not even visible to finance teams on a daily basis. Most companies don't have processes and systems in place to actively manage cash and liquidity. $1.5 trillion of liquidity is trapped on company balance sheets, according to PwC figures. The importance of cash flow forecasting is universally recognized100% of CFOs and treasurers in a 2019 PwC survey said it was a top prioritybut companies are woefully outgunned when it comes to understanding their current cash position (across all functions, subsidiaries, regions, currencies, etc.) which underpins forecasting and strategic cash usage. Aite Group, the analyst firm, estimates that about 45% of all corporate treasurers for small and midsize enterprises still used spreadsheets to manage liquidity in 2020.

6 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME REIMAGINING LIQUIDITY MANAGEMENT Elevating a company to a legitimate state of enterprise liquidity management requires an ambitious reimagining of how it connects to its sources of liquidity. Those sources include banks, third-party providers, non-financial liquidity providers and internal providers, with requests for payments and collections. Engaging in enterprise liquidity management also demands a complete dedication to the pursuit of activating all possible sources of liquidity. These could be revolving credit facilities, commercial paper and bond issuance, accounting receivables mobilization, accounting payables acceleration, active asset management, off-balance-sheet monetization and other types of structured transactions. It also means monitoring the availability, prices, duration, currency and security packages for each source. And it involves constant optimization staying ready for overnight arbitrages, for exampleand monitoring optimization opportunities continuously. Another key part of enterprise liquidity management involves leveraging technology to reinforce liquidity control, such as continuously upgrading algorithms and machine learning processes rather than stacking manual processes. These technology tools should be backed by data and supported through networks. Effective liquidity management incorporates networks and platforms hosting liquidity data traffic between ERPs and banks.

7 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME What does good enterprise liquidity management look like? Generally speaking, CFOs and their finance units are engaging in good enterprise liquidity management when they are effectively enabling the strategic usage and planning of cash. This means they have established centralized ownership of enterprise liquidity, with a set of core processes and critical capabilities: They create a cash-centric view of liquidity throughout the enterprise, with capacity to forecast its evolution in time. They maintain robust, standardized processes to control cash movements between any corporate entity or function and any payment or collection channel. They mitigate risks to on-demand liquidity, such as market, counterparty, operational and fraud risks. They maximize returns and/or minimise cost of funds on all available liquidity and reduce transaction and operational costs. The base that these four critical capabilities are built upon is a robust, secure network; one that connects all of the company's internal systems to all of its suppliers and liquidity providers. The network must provide a reliable, consistent liquidity data set. This approach to connectivity is essential as the corporate liquidity network grows more and more complex. To build reliable views for the critical capabilities to work from, this network needs to be able to adapt to changing business needs like product expansions or new liquidity channels.

8 I ENACTING ENTERPRISE LIQUIDITY MANAGEMENT: WHY NOW IS THE TIME PLAN AND EXECUTE Adopting enterprise liquidity management is a long-term endeavor that requires a comprehensive plan from the CFO, backed by the CEO and company board of directors. Another important partner in this collaboration is the chief information officer (CIO), along with the IT function. Effective enterprise liquidity management relies on robust, secure, agile connections between ERPs, banks, fintech, marketplaces and suppliers, all made possible by an engaged through collaboration with a proactive IT team. That connectivity underpins the holistic data that drives critical enterprise-wide analysis, insight and decision making. Cultivating an ongoing partnership between finance and IT will be crucial, as will the need for finance staffers to become tech savvy. As part of the comprehensive planning for enterprise liquidity management, the CFO and CIO have several key decisions to make: Establish who will own the new discipline, whether it's an extension of the treasury domain or an entirely new role, like a chief liquidity officer who reports to the CFO. Though there are exceptions, many of the activities comprising enterprise liquidity management occur outside the typical duties of a treasury operation and don't have clear ownership. It requires cross functional understanding and insight from accounts payable, accounts receivable and financial planning and analysis Identify current workflow / processes, highlighting those which are digital / automated (thus more easily incorporated into an Enterprise Liquidity Management discipline) and those for which a digitalisation / automation effort is needed Choose a system provider to support the enterprise liquidity management. The most effective enterprise liquidity management tools have a liquidity-centric view of the world, with a dedicated and reliable view of liquidity data 'on demand' that is consistent, consolidated and centralized, not accounting data that has been adapted and the tool should deliver enterprise wide, 'liquidity-centric' workflows across contributing disciplines (e.g. treasury, payments control, risk management, supply chain finance) Build standardized processes that can be deployed across every subsidiary of the company in every region, language and currency, all sitting on the same platform

Answer the following questions

What are some of the key factors which make the finance department successful?

Should multinational corporations have multiple regional Treasury Departments, or one?

What are some of the tactical decision a CFO can implement towards enacting enterprise liquidity management?