8 min read

Key takeaways

  • With a high interest rate environment and macroeconomic uncertainty, businesses should focus on strong balance sheet management and maintain access to liquidity.
  • Efficient working capital management can help businesses generate additional free cash flow and optimize capital structure to weather economic uncertainty and continue to invest towards future business growth.
  • Through insights derived from this working capital analysis, the report will help corporates benchmark and optimize their working capital performance.


Summary of findings 

Summary of findings

Industries outlook

To understand working capital trends and drivers, the report further examines four key industries that experienced significant change in their working capital levels in 2022.

  • Technology, Media and Telecom Industry: Semiconductors
    • Our analysis suggests CCC for the industry increased by 18 days, the majority of which was due to increase in DIO which jumped by 19 days. Semiconductor companies were forced to react to supply constraints by building excess inventory and faced challenges of reduced demand, resulting in higher working capital. Cloud and AI related infrastructure build out require vast sums of capital and inventory of advanced chips, putting pressure on balance sheets across the entire technology ecosystem. Meanwhile, semi-conductor producers over corrected for the past shortage of low value chips needed in some manufacturing sectors.
  • Consumer and Retail Industry: Apparels and Accessories
    • Inflation negatively impacted the consumer discretionary spending, thus leading to lower than anticipated demand and higher inventory in Apparels & Accessories, causing working capital to rise. Corporates also faced the global supply chain disruption in early 2022 resulting in delayed inventory deliveries and making companies plan their purchases accordingly keeping delayed times into account. However, transit time improved sooner than anticipated, which left companies with more inventory than required. Overall, we observed CCC rising by 12 days for the industry.
  • Healthcare Industry
    • The healthcare sector experienced increased working capital due to supply side disruptions caused by China led shortages and fading away of COVID related tailwinds for some of the companies. CCC for the healthcare industry jumped by 8 days mainly due to an increase in DIO and DSO.
    • However, with the tailwind of COVID-related drug demand subsiding in 2022, we have seen inventory levels going up again for healthcare companies, especially the ones which were actively involved in producing COVID related drugs. We also observed the impact of this on DSO which jumped up by 1.9 days from 2021.
  • Energy Industry: Oil and Gas Upstream
    • The CCC for the industry decreased significantly by 24 days largely due to the contribution from DSO and DIO, both of which declined by 12 days.
    • Supply shortage, the war in Ukraine and elevated demand helped Oil & Gas companies to source and distribute energy with higher velocity resulting in faster collections and reduced inventories, causing CCC to improve significantly.


Lessons from the past

As businesses gear up for a potential economic slowdown, we analyzed the lessons learned from the previous economic downturn during the 2008 Great Recession.

  • Lower leverage supports higher growth in recovery
    • Companies with lower indebtedness have balance sheet agility. This gives them better protection against risks and provides flexibility to invest into growth during recovery.
    • Corporates with high debt should look to bring in more capital discipline and rationalize their debt levels over the next year.
  • Higher capital outflows translate into higher revenue growth
    • Companies investing early are in better position to capitalize on demand growth, when the economic recovery begins.
    • In the present scenario, companies can aim to shore up funds, to utilize on capital spending to increase CFI. As the economy starts to show early signs of recovery, this can help companies maximize sales growth.
  • Efficient working capital management provides flexibility
    • Working Capital optimization empowers corporates to free up capital from their balance sheets, providing flexibility to build liquidity buffers during slowdowns and strategically invest in de-leveraging or growth opportunities when the timing is opportune.


Our analysis suggests ~US$633bn of potential liquidity is currently trapped in working capital for S&P1500 companies.

In light of the challenges and opportunities that lie ahead in 2023-24, we expect working capital optimization to be a key focus area for treasurers and CFOs, as it offers a cost-effective funding source for companies to optimize capital structure and also support investments in other strategic priorities like digitization, sustainability and capital expenditure.


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