Cash Flow Liquidity Risk

Cash flow liquidity risk refers to the possibility that a company may not have enough cash available to meet its short-term financial obligations, such as paying suppliers, employees, or debts. This risk can arise when cash inflows are delayed or insufficient compared to cash outflows. Effective liquidity risk management involves monitoring and planning cash flows to ensure that there is always enough cash on hand to cover immediate expenses and prevent financial distress. By managing this risk, companies can maintain stability and continue their operations smoothly.