Set a Liquidity Buffer Like a Risk Control
Define a cash buffer from risk exposure rather than from leftover cash.
A buffer is not idle cash when it is assigned to a real risk. Identify the exposure first Risk-based liquidity starts with the events that could interrupt cash: delayed receipts, emergency purchases, covenant pressure, tax timing, payroll, or supplier disruption. The buffer should map to the size and timing of those exposures. Treat the risk deliberately Keeping cash is only one treatment. Others include credit lines, insurance, payment terms, customer concentration limits, or tighter forecasting. A buffer is appropriate when the consequence of delay is high and the response window is short. Monitor the rule, not just the balance A…
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