The Governance Revolution

Chapter 30 Navigate Corporate Hazards and Distressed Situations

There are many hazards that can hurt the company and drive it toward failure. The proximate cause of collapse, though, is always, at least in my experience, a lack of liquidity, or, in other words, running out of cash. Given how universal this is, it always surprises me that so few companies have a real process for tracking availability of cash. Though I had nothing to do with creating it, I have served on the board of a company that used a great quarterly exhibit: number of days cash on hand, given certain assumptions. They have tracked it for many years, and thus have a way better than average understanding of their cash dynamics.

That company is, however, the exception. Nobody ...