Most corporate cash strategies assume that funds placed with a bank or invested in a cash equivalent today will be available, at worst, the next business day. History shows, however, that this assumption is generally true until there is a material market disruption. When liquidity shortages emerge, cash that appears available on paper can become temporarily inaccessible.
Why Liquidity Crises Matter
Any interruption to liquidity flows, large or small, can immediately disrupt a company’s ability to meet daily obligations. Payroll, supplier payments, tax liabilities, and contractual settlements do not pause during periods of market stress.
Despite a strong supervisory regime in the U.S., banks still fail on occasion. When they do, their collapse can be sudden and spread fast, and the regional banking turmoil of 2023 is the most recent example of how quickly liquidity confidence can break. Silicon Valley Bank experienced a rapid run on deposits, with $42 billion withdrawn in a single day1. At the time of failure, 88% of deposits exceeded FDIC insurance limits, leaving many corporate depositors with uninsured exposure2. While deposits were ultimately backstopped, access to funds and payment rails was temporarily disrupted during the resolution process, serving as a reminder that even insured capital can become operationally constrained.
When one financial institution fails, others respond by tightening balance sheets and limiting exposures. Collectively, these actions can result in broader liquidity shortages, even among companies with strong credit profiles and cash on the balance sheet.
Liquidity risk is inherent to the way the financial system is structured, with significant cross-institutional exposures and the leverage that is built into it. Treasurers and finance leaders are forced to operate within this system. In managing corporate liquidity, the challenge is balancing risk, return, and operational certainty across different instruments.
Under stable conditions, short-term instruments typically function as intended and provide modest returns. In periods of stress, however, the primary risk is rarely the permanent loss of capital. More often, it is the temporary loss of access to cash when it is most needed. Liquidity is not defined solely by asset ownership but by the ability to convert assets into settled cash and mobilize funds through payment infrastructure without delay.
The Structure of a Cash Instrument Matters
Many organizations rely on a combination of bank deposits and money market funds to safeguard liquidity. While these instruments perform effectively in stable environments, they carry structural limitations that can emerge during market stress.
Even insured deposits can become temporarily constrained during bank resolution. During the failure of Silicon Valley Bank, deposits were protected, but clients temporarily lost access to payment rails, leaving them unable to mobilize cash.
Similar access constraints arise in pooled investment vehicles such as money market funds (MMFs). When an organization invests in a MMF, it does not own the underlying securities directly. Instead, it owns shares in the fund itself, which is actively managed and subject to liquidity policies, redemption terms, and regulatory requirements.
Significant redemptions may force a fund to sell its most liquid assets to meet withdrawal demands, leaving remaining shareholders with a portfolio of longer-duration, less liquid assets. In that scenario, remaining investors may experience changes in portfolio composition, returns, or potential redemption fees as the fund is forced to sell liquid assets first.
Why Access to Cash Does Not Guarantee Payment Continuity
Liquidity risk during a crisis is driven not only by the behavior of cash instruments, but also by whether intermediaries allow payments and obligations to be settled without delay. Funds can be liquid on paper, yet still become entangled in bank infrastructure when transfers or redemptions are required.
For finance leaders, this means evaluating liquidity through a broader operational lens. The key question is not simply whether assets can be liquidated, but whether they can be converted into settled cash and deployed when needed.
A Framework for Resilient Liquidity
Building resilient liquidity requires answering two fundamental questions.
First, at any given time, what level of liquidity is required to fulfill all critical obligations? Cash flow forecasts may predict future needs, but they do not always prioritize non-deferrable payments or timing certainty during stress.
Second, how can that required liquidity be allocated to ensure it remains accessible and operational at all times? This requires assessing both asset quality and the mechanics of access, including the intermediaries involved in making funds available for payment.
Applying this framework helps narrow the set of instruments suitable for crisis-resilient liquidity. Assets must preserve principal, remain liquid under stress, and allow for direct, predictable access without reliance on discretionary redemptions or complex chains of intermediaries.
Liquidity Stress Testing
Finance leaders use this liquidity stress test checklist as a high-level framework designed to support internal review of cash strategy resilience before disruption occurs.
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Building Liquidity Resilience with Direct T-Bill Ownership
Treasury bills are widely regarded as the benchmark for safety and liquidity in global markets. Investing in T-bills directly can provide a structurally safer alternative to traditional cash instruments by delivering yield, safety, and reliable access in stable environments and, importantly, during periods of market turmoil. During crises, investor demand for safe assets increases, supporting liquidity and market depth for T-bills.
T-bills are uniquely safe when owned directly by an organization thanks to their structural simplicity. The organization owns the underlying government security itself, without exposure to leverage on a financial institution’s balance sheet and without commingling with other investors’ assets. There is no reliance on a bank’s solvency, no dependence on a fund manager’s liquidity position, and no redemption fees or gates triggered by investor outflows.
For finance leaders, the benefit of direct T-bill ownership extends beyond asset safety. It provides a predictable path to liquidity that remains functional during periods of stress.
Why don’t more finance and treasury teams allocate cash directly to T-bills? The short answer is that, historically, it has been too burdensome. For many organizations, even those without dedicated fixed income trading expertise, investing in T-bills requires trading, monitoring short-term maturities, and managing CUSIPs and reinvestment constantly. After a bill is sold or matures, proceeds typically must be transferred to a separate operating account before payments can be initiated. That transfer process, much like redeeming from a money market fund and waiting for funds to settle, can introduce added effort.
The barrier has been the mechanics of accessing them efficiently while preserving day-to-day payment functionality. Until now.
T-Bill Operating Accounts
Innovations in banking and trading technology have introduced T-bill operating accounts, which combine automated investment in directly owned U.S. Treasury bills with the full functionality of an operating account.
Not only do these accounts automate all the trading, reinvestment, and liquidation of T-bills on behalf of account holders, but payments (ACH, wire, card, on-us) can be initiated directly from the accounts. Liquidity is continuously invested in directly owned Treasury bills and can be converted and deployed within the same operational framework.
As the pioneer of T-bill operating accounts, Jiko was specifically designed to preserve access to cash and payment functionality in environments where traditional channels may experience disruption. Jiko’s T-bill operating accounts represent a structural evolution in corporate liquidity, aligning safety, yield, and payment continuity in a single framework. In periods of calm, they function efficiently. In periods of stress, they are designed to remain dependable.
Learn more by getting in touch with Jiko:
https://www.jiko.com/get-in-touch
Download the Liquidity Stress-Test Checklist
Market disruptions rarely provide advance notice. Finance leaders who stress-test liquidity structure before volatility emerges are better positioned to maintain payment continuity when conditions tighten.
Download Jiko’s Liquidity Stress-Test Checklist to evaluate your current cash strategy and identify structural vulnerabilities before they surface.
[Download the Checklist]
About Jiko
Jiko is built for unmatched safety, liquidity, and simplicity by combining the innovation of a modern technology platform with the security of a regulated bank. By reinventing the traditional deposit model, Jiko delivers the transactional ease of a bank account with fully automated investment in U.S. Treasury bills. Trusted by leading institutions to hold and move corporate cash, settle high-volume transactions in real-time, and deliver liquidity 24/7, Jiko has been on a mission to help institutions safeguard and move cash securely, at scale. Through API integration and partnerships, Jiko extends these capabilities across retail and corporate accounts of every size.
1. Source: FDIC
2. Source: FDIC
Disclosures
Investments in T-bills: Not FDIC Insured - No Bank Guarantee - May Lose Value All US Treasury investments and investment advisory services provided by Jiko Securities, Inc., a registered broker-dealer, member FINRA and SIPC. Securities in your account are protected up to $500,000. For details, please see www.sipc.org. Banking services provided by Jiko Bank, a division of Mid-Central National Bank. Commercial and consumer account limitations may vary.
Jiko Group, Inc. and its affiliates do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. See FINRA BrokerCheck, Jiko US Treasuries Risk Disclosures, and Jiko Securities Inc. Form CRS.