The Current Problems of System Illiquidity and the Possibilities for the Protection from Liquidity Risks in Companies

Danica Prosic

Ekonomika, Journal for Economic Theory and Practice and Social Issues, 2013, vol. 59, issue 3

Abstract: Liquidity risk as a significant component of financial risk which almost every company has faced recently is increasingly in the focus of the interests and priorities of management function. Illiquidity of a company is not just its problem, but most usually the problem of its key stakeholders. By not paying for their liabilities, companies transfer them to their business partners, who, through claiming sums they are owed to, subsidize their inefficient operations. In this way, negative effects can be transferred as a domino effect to other companies. Although there are numerous instruments, diagnostic and analytical frameworks that provide information for rational management of liquidity risk in the companies, insufficient attention is paid in practice to the first signs that point to the problems with liquidity. This paper analyzes the possibilities for protection against liquidity risk with the aim of reducing it to a minimum.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ags:sereko:289151

DOI: 10.22004/ag.econ.289151

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