Inflation and interest rates
Inflation has ramped to 10% or more in many western markets and central banks are responding with hikes in interest rates - North American and European markets are all making the largest interest rate increases in many years.
Pressure on working capital
Combined with the ongoing fall-out from supply chain disruptions in China and elsewhere - with up to a fifth of container ships stuck outside ports in the last months - the situation for our clients has changed. PE and corporate clients are seeing an increasing squeeze on profits and cash flows in particular, as safety stocks are increased and the rising cost of energy and raw materials inflate inventory costs.
Increases in interest rates and debt market concerns are raising costs of financing that working capital and any potential deterioration in payment behaviour by customers will exacerbate the situation.
Beyond cash
For many clients, once the immediate cash pressures have been alleviated, there should be opportunities to expand into broader forecasting and treasury or hedging topics. This can embed and support the ongoing control of working capital and allow clients to focus on profit improvement measures.