Sateenvarjo ja kaupunki

Funding and liquidity risks

Through effective funding risk and liquidity risk management, you can ensure that your company will be able to fulfil its payment obligations irrespective of external factors.

How can you manage funding and liquidity risks?

Your company should secure sufficient, well-balanced and well-performing financing in all circumstances. Long-term funding liquidity risks and loan refinancing risks constitute the key risks against which your company  should hedge. Your company can mitigate risks through sufficient reserves, such as long-term committed credit facilities and a well-balanced loan repayment plan. .

If your company's available funds and funding opportunities are insufficient to cover cash outflows in all circumstances, it will pose a liquidity risk. Risks may be longer-term structural funding risks or shorter-term liquidity risks. The business of a company in liquidity difficulties may be in great trouble or even end with insolvency caused by lack of liquidity.

Through effective liquidity risk management, the aim is to ensure that your company will be able to fulfil its payment obligations at all times, irrespective of external factors.
Your company should have sufficient cash or other assets in various parts of the Group, in currencies required and available both in the short and long term. Monitoring, planning, close contacts with lenders and foresight form the key in the management of liquidity risk exposure.

Liquidity and funding risk management is integrally linked to the business of all companies; without funding, there are no opportunities to continue business operations.

Contact your local OP member cooperative bank and we will together plan financing solutions for effective funding and liquidity risk management that best suit your company's needs to maintain sufficient liquidity.

There are a number of tools to manage your company's liquidity risk

  • Cash flow forecasting:
    This means forecasting your company's future cash outflows and inflows. It helps to perceive the ongoing need for liquid funds on the basis of cash flow fluctuations and peaks.
  • Effective liquidity management tools:
    Various account and payment transaction arrangements through which it is possible to get a picture of your company's liquidity status and financial resources are effectively available, such as repatriating funds quickly from your company's accounts abroad.
  • Liquidity buffers:
    These typically include cash, short-term investments, committed credit facilities and assets available for sale in the longer term. Buffers should be assessed from the perspective of their availability: to what extent and within what period various buffers are available for use?

 

Funding risks can also be managed

  • Capital management:
    Your company seeks to secure its capital resources through sufficient equity financing.
  • Funding policy:
    Your company seeks to mitigate risk through systematic long-term planning and foresight.
    • Availability and sufficiency of funding:
      Your company have access to wide and diverse funding sources, such as banks (with a solid financial standing), specialised financing companies (e.g. Finnvera, EIB), debt capital markets (e.g. commercial papers, bonds) and TyEL relending (relending from employment pension insurance companies).
    • Well-balanced loan repayment plan:
      Your company's loans fall due for repayment regularly in different years, short-term debt is not excessive relative to long-term debt, the loan interest rate basis (fixed/floating) corresponds to the market rate structure and the currency allocation of loans corresponds to that of your company's business cash flows and balance sheet assets.

A diversified service package for managing working capital and credit risks:

Corporate credit account

Credit facilities

Factoring

Secure your company’s business continuity with systematic risk assessment and preparations.