Working Capital Strategy – A CEO Priority


Divya Kumar

May 15, 2015

While Working Capital has traditionally received attention from the Finance team, the same cannot be said for the strategic and executive arms of the organization. This is slowly but surely changing: Working Capital strategy has unchained itself from the Controller’s desk and landed on the CEO’s desk. 

Both external and internal factors have influenced this trend. With funding in most industries harder to come by post the global downturn, organizations have started looking at internal means of generating cash. Working Capital has become a key lever for releasing cash to fund expansion and growth. Further, as organizations become more global, and processes more complex, the impact of each of these on Working Capital is being more keenly felt.  Working Capital Management, Planning and Analytics have become an ongoing exercise with visibility at the highest level. 

This has also highlighted the role of Working Capital in impacting shareholder wealth.  A key research paper studied data from about 4,000 companies over a 16 year period and found that a staggering 27.7% of their  assets were locked up in net operating Working Capital (Accounts Receivable + Inventory – Accounts Payable). They also concluded through other findings that every $1 locked up in net operating capital is worth 52 cents less for shareholders than $1 held in cash that can be invested in growing a business – a significant discount of almost 50%. 

The transition of Working Capital from being managed tactically to strategically has not been an easy one. In discussions with CFOs, I find that CEO Business Unit reviews are increasingly including levers of Working Capital as metrics. This is cascading down to many arms of the enterprise – Operations, Sales, Supply Chain, Procurement, IT, Quality Control – which are being made aware of the consequences of their processes and actions on the cash flow of the enterprise. 

The strategic importance of this change is also putting Working Capital Analytics into the spotlight. I see more and more companies pooling data across the entire organization to generate a more holistic view, so they always have a finger on the pulse of all aspects of Working Capital information. They are more clearly defining levers and lead indicators, and are tracking them on an ongoing basis. While cash forecasts have always been a mainstay of organizations, these are getting much more sophisticated with the use of tools, statistics and other predictive modeling techniques that enhance the accuracy with which cash needs and cash generation opportunities are identified. With nearly 2,000 leading American and European companies having up to $1.3 Trillion of cash unnecessarily tied up in Working Capital, there is clearly a need for more to be done to unlock this value. 

This blog is Part 1 of a 4 part series on Working Capital.  To find out more about Capgemini’s Working Capital Analytics, visit

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