PWC’s Working Capital report
PWC’s report outlines the importance of improving your firm’s working capital position, both in terms of enhancing responsiveness to BAU opportunities and generating value through improved Return on Invested Capital (ROIC). PWC also outline the transformative potential of digital technology in helping firms to achieve these goals.
Within the full report (link below) you’ll find:
- A viewpoint as to why Working Capital positions are so important. PWC argue that digital disruption, ongoing convergence between industries and dramatic shifts in business models all place greater emphasis on companies’ abilities to create value.
Working Capital can deliver value creation both in terms of acting on BAU opportunities but also in terms of an optimised return on a firm’s invested capital.
- An assessment of the financial performance of the largest global listed companies over the past five years, with particular focus on their working capital position.
Key headlines include:
– Net Working Capital (NWC) increased by €360bn, an increase of 9.4%.
– Revenue is up 10%, but Operating Cash Flows (OCF) are down as a proportion of sales.
– €1.2Trillion of excess Working Capital is tied-up on balance sheets.
– Addressing excess Working Capital would boost ROIC by 30bps.
However, the report also looks at variances across working capital profiles by sector and company (while the global Working Capital position is up 9.4%, only eight out of eighteen sectors have improved their working capital position), and considers the varying sector challenges and focuses that may be driving these discrepancies.
- An outline of how digital technology can help firms achieve stronger Working Capital positions and returns. Whilst firms have been quicker to recognise Digital technology’s role as a driver of innovation and transformation in other aspects of their business, PWC argues there’s still significant potential to do so with regards to NWC.
Firms should be making use of data analytics, artificial intelligence (AI) and robotic process automation (RPA) to optimise operational processes and decisions that underpin the working capital cycle. The report explores various considerations for firms looking to drive optimal working capital performance.
Companies that are able to exploit digital’s benefits will lead the way in unlocking cash and creating more value. Digital enablers are now sufficiently accessible and flexible that they should be a standard tool for accelerating working capital improvement and, naturally, PWC would be happy to help any firm looking to better understand and/or implement these solutions.
To read PWC’s Working Capital Report in full, please click here.