Trapped Cash Is the Real Liquidity Problem, Says J.P. Morgan Payments

Quick Summary

Mali Bartlett, Managing Director, Liquidity & Account Solutions at J.P. Morgan Payments, argues that the main liquidity challenge for multinationals is trapped and fragmented cash rather than the total a company holds. A large balance does not mean cash can be moved automatically: it may sit in the wrong legal entity, in a market with regulatory restrictions, or in a currency that is difficult or costly to mobilise. Her team helps clients improve visibility, increase fungibility and automate movement where possible.

Is the challenge the amount of cash or where it sits?

In Bartlett's view, it is much more about the latter. She says one of the misconceptions her team deals with is that a large cash balance can automatically be moved, so a customer must have plenty of liquidity at hand.

The real question for a company, she says, is how much liquidity it can actually access.

Where does cash get stuck?

Bartlett gives three examples. The cash may be sitting in the wrong legal entity, in a market with regulatory restrictions, or in a currency that is difficult, or even costly, to mobilise quickly.

It is rarely about one market and one currency. Treasurers need to understand how much liquidity they have, what the regulations are and how FX implications interact across the global markets they operate in.

What can be done about it?

Bartlett sees an opportunity to work with clients on the mobilisation of liquidity, because in a restricted market the cash does not always have to be inaccessible. J.P. Morgan Payments is helping clients think about structures that improve visibility and increase the fungibility of cash and, where possible, automate the movement of liquidity across the organisation.

Clients need liquidity management combined with FX solutions, she adds.

FF NEWS TAKE:

Headline cash balances flatter the picture. Bartlett's point is that liquidity only counts if it can be reached, in the right entity and the right currency, at the right time. The conversation for treasurers is shifting from "how much do we hold?" to "how much can we use?", and structures that make cash more fungible are how that gap closes.