As businesses seek to address both the immediate and long-term effects of COVID-19 on their operations, the reinsurance industry is at the forefront of conversations to create a forward-looking solution for pandemic risk in conjunction with policyholders, insurance markets and key policymakers.
Managing liquidity during COVID-19 has become both challenging and critical for businesses. The pandemic has exposed important gaps in the frameworks, analytic tools and processes by which companies make decisions in crisis regarding liquidity.
Decisions that are rapidly made today frequently suffer from a lack of robust underlying information, insufficient consideration of trade-offs and implications for the broader ecosystem (for example, suppliers), and lack of clear oversight. This challenge is exacerbated in times of crisis, where decision making needs to be well-informed and quick to avert financial distress and unintended consequences, according to Oliver Wyman Financial Services Partners, , and .
Closing critical gaps — especially for urgent needs like cash visibility — should be a priority considering the likelihood of multiple waves of the pandemic and a prolonged economic crisis.
In order to make good decisions consistently over time and in the face of uncertainty, companies need to effectively develop their capabilities to answer four central questions (see Exhibit 2). For liquidity management, this translates to a set of specific capabilities that are described within this paper.