Liquidity risk

Liquidity risk has a number of important dimensions for the corporate treasurer. These include the corporate organisation as a whole, individual investments, and the wider markets for borrowing and lending.

1. For an organisation, liquidity risk is the risk that the organisation ceases to have access to the cash it needs in order to meet its financial obligations as they fall due. This can arise from a number of different causes, both internal and external to the organisation.
2. For an individual investment, liquidity risk is the risk that the investment cannot be turned into cash quickly and without significant loss in value.
3. Liquidity risk at the market level includes the drying up of borrowing markets, disrupting the financing of individual organisations.

See also

• Cash
• Documentation risk
• Funding liquidity risk
• Liquidity
• Market liquidity risk
• Guide to risk management

Other links

Liquidity risk management, Will Spinney, ACT 2010